Because a Debt Management Plan (DMP) is an informal agreement it does not give you any legal protection from your creditors and they are not obliged to stop their enforcement actions against you.

This means that even if you start a Plan and make your payment regularly one or more of your creditors could still chase you to pay more and even take further legal action against you.

We will consider how likely it will be that your creditors will take such action once your Plan has started and what you can do to try and minimise the risk.

How will your creditors react when you start a Debt Management Plan?

One of the advantages of a DMP is that it is quick to implement. When you start a DMP you can immediately reduce your payments towards your debts. However this does not mean that your creditors will accept these immediately.

It is likely that it will take 3-6 months for all of your creditors to accept the proposed reduced payments. During that time many or all of them will continue to add interest and late payment charges to your accounts and continue sending you payment demands.

Nevertheless after 3-6 months you should expect that the majority if not all of your creditors will agree as long as your offer of payment is clearly the best that you can afford. Once they have agreed they will normally also stop adding interest to your accounts. However there is no guarantee of this.

BMD Tip: Even if a creditor accepts your reduced payments and agrees not to continue sending you collection letters they may decide to continue to add interest in full or at a reduced rate.

Do you want help to start a DMP? Give us a call on 0800 077 6180 or complete the form below to speak to one of our experts

There is no guarantee your creditors will agree with your DMP

Your creditors do not have to agree to your DMP payment proposals. To have the best opportunity of them all agreeing you must ensure that you are paying as much as you can into the Plan. However despite this it is still possible that one or more of your creditors will not accept your offer.

If this happens you must make sure you maintain the proposed payment to them. If you try to pay them more it will throw your whole Plan out of balance as you cannot afford to do this without affecting your other creditors.

The creditors who do not agree are likely to continue adding  interest and late payment charges to your account. They may also continue to chase you for the full repayment of the debt you owe by continuing to send payment demand letters and making phone calls.

Unfortunately in this situation there is very little you can do other than continuing to try and negotiate with the creditor (or asking your debt management company to do so if you are using one) and asking them to reconsider based on the fact that you are maintaining the payments you said you would.

What is the risk of getting a CCJ or Charging Order during a DMP?

Normally if your creditors are in agreement with your DMP payments they will not take further legal action to enforce their debt. However you cannot ever rule this out particularly if you are a home owner.

If you are a home owner this type of debt solution may seem like the best as you have no obligation to release equity from your property to pay your debts.  However it is important to understand that any creditor can still apply for a CCJ against you at any time and then automatically apply for a charging order against your property.

Once a charging order is issued this does not give the creditor the right to try to force you to sell your home. However it does give them additional security over the debt. It is advisable to continue repaying the debt as part of your Plan but if and when you do decide to sell your home any amount still outstanding will have to be paid in full from the equity in your property.

What are the alternatives if your creditors will not agree your DMP?

The main issue with a DMP is that it gives you no legal protection and therefore you will continue to be vulnerable to further action while you are in it. This is of particular concern if you are a home owner because of the very real risk to your property of charging orders.

If you want to guarantee that your creditors will never take further enforcement action against you or your property you will need to consider using an alternative debt solution such as an Individual Voluntary Arrangement (IVA).

Once agreed the IVA goes give you legal protection from your creditors and they are prevented from chasing you any more by law.