A Debt Management Plan (DMP) is a popular way of dealing with personal debt problems. However if you have been in one for a while but for some reason you feel it is not working for you what can you do?

The good news is that because the solution is informal you can change or even stop it at any time. This means that you are always able to review how it is working for you and amend it if necessary.

In this article we explain your options if your Plan is not working including the possibilities for sticking with the agreement but making changes to it or the option of changing to a totally different debt solution.

Why is your Debt Management Plan failing?

It is important to understand why your DMP is failing so that you can decide the best action to take next.  The Plan may not be right for a number of reasons.

It may be that your circumstances have not changed however simply being in the Plan for a few months has given you time to start thinking more clearly about your debt problem. You may have started to review the implications of the Plan more closely and realised that it is not really suitable for you.

Alternatively you may have found that some or all of your creditors have refused to freeze their additional interest or late payment charges. This means that although you are making your payments each month your debt is not actually going down and in the worst case is actually increasing.

Another reason that the solution may not be right for you any more is that your circumstances have changed. Perhaps your finances have become worse and you are now struggling to make your agreed payment or in fact you can now afford to pay more.

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Can you change your monthly DMP payments?

If you have had a change in your circumstances a DMP might work well for you because due to its flexible informal nature you can change your payments at any time.

If you need to reduce your payment because your income has reduced or your living expenses have increased you can do so. However you need to be aware what affect this will have. Clearly it will take you longer to pay your Plan. However a more serious implication is the possibility that your creditors will start adding interest to your accounts again.

Your creditors will do this if they feel you have broken the original terms of the agreement. However if the reduction in your payments is managed properly and the situation is fully explained to your creditors they may accept the change without too much trouble.

BMD Tip: If you are in a position to increase your payments this is often a sensible thing to do as it will mean that your debt  is paid off quicker however you are not obliged to do this. Instead you could hold back the extra money and use the lump sum you save to settle some of your debts which will also enable to pay off your debt faster.

Can you change your DMP management company?

If you you are having problems with your DMP such as your creditors are not freezing their interest charges you may feel that the company you are using to manage your Plan is at fault. If this is the case you can change to another company at any time. You are not legally tied to the original one.

Whether you are working with a fee charging company or a free charity you always need to be checking to make sure your creditors have frozen their interest or charges. If this is not happening you must look at the options of moving your Plan to someone who will be able to do a better job for you.

If you want to move your plan you can simply stop payments to your current company and start them up again with a new one. Alternatively you could take over the management of your Plan and continue making the agreed payments yourself.

BMD Tip: You should make sure you have chosen a new management company before stopping your payments to the old one so you do not leave a gap between payments to your creditors or they might start adding interest in the mean time.

Can you stop your DMP and use a more suitable debt solution?

If after trying a DMP for a while you have decided it is not working for you or after a change in your circumstances you now feel that it is no longer suitable for you there is always the option of changing to a totally different debt management solution.

You can stop your plan at any time without notice whether you are working with a management company or managing it yourself.

The first option you should consider is an individual Voluntary Arrangement (IVA). The main advantage of this solution is that you will only have to make payments for 5 years as standard. After this any unpaid debt is written off. As such you can be debt free far more quickly using this type of Arrangement instead of a DMP.

Another significant advantage is that interest or charges can no longer be added to your account balances by law and the Arrangement  offers you legal protection so if you are a home owner there is no risk of getting a charging order against your property.

BMD Tip: An alternative solution you should also consider is Bankruptcy. This can be particularly useful if you cannot really afford to make payments towards your creditors because where that is the case you will not have to do so. Even if you can afford monthly payments these will only last for 3 years.