Struggling to pay your debt management plan (2024)

FAQs

What happens if I can't pay my debt management plan? ›

Missing a payment will mean your creditors don't get the monthly payment they're expecting, which may mean they decide to stop co-operating with your DMP. Don't bury your head in the sand, as this will only make the problem worse. Talking to your provider quickly is the only way to get the problem sorted out.

To cancel your DMP, you need to contact your provider and ask to cancel. They will inform your creditors that the agreement has been cancelled, so you can expect to start dealing with them yourself again.

Can creditors refuse a DMP? Yes – creditors are under no obligation to accept your DMP. They might do this if they don't want to accept reduced payments or feel you could afford to pay more. If they refuse to negotiate with your DMP provider, it can be worth negotiating with them yourself.

While some DMP providers might offer a temporary 'payment holiday' in exceptional circ*mstances, it's not standard practice to pause payments for unnecessary expenses like holidays. Remember, pausing your payments can extend the duration of your DMP and might affect the agreements in place with your creditors.

There is no set amount of time for a debt management plan, as it depends on how much you owe and the amount you can afford to pay in monthly payments. However, there can be changes to your credit file and potential credit score. Discover what happens after 6 years on a debt management plan…

Taking a break can provide temporary relief, but it will extend the duration of your DMP, taking you longer to pay off your debts. Also, bear in mind that while you may not be making your monthly payments, it's possible that your creditors will continue charging you interest, fees or charges.

Your Bank Account & A Debt Management Plan

In conclusion, a Debt Management Plan (DMP) does not directly affect your bank account. You can usually continue using your current bank account as usual when you enter a DMP providing that you do not wish to include a debt on your DMP that is with your bank account provider.

Although you can reduce the amount you pay, this is a sign that your DMP is not going as well as you had hoped and it will take longer until your debts are cleared. So it's worthwhile pausing and thinking about whether you can improve it.

There isn't a fixed maximum debt level for a DMP. What's more important is whether the plan can help the debtor manage and clear their debts in a reasonable amount of time. If someone has a very high level of debt, there is a chance that either the monthly payments or the duration of the DMP would be unrealistic.

If the creditor doesn't want to deal with the DMP provider, they can still take action to recover the money you owe, which might include taking you to court. If this applies to you, ask the creditor why they're not willing to co-operate with the DMP.

Can you settle a DMP? ›

Paying your DMP off early with a lump sum (full and final settlement) If you have had a windfall – whether it's an inheritance, an insurance payout or redundancy payment – you could use it to pay off the remainder of your DMP all at once.

Even if you're in a DMP, your creditors may still record that you've missed payments, as you'll be paying less than you agreed to when you took out the original credit agreement. This will mean you could find it harder to get credit while you're making reduced payments and for some time afterwards.

A debt management plan can help make it easier to pay down credit card debt, often with lower interest rates and monthly payments—and it can keep debt collectors off your back. But if the plan is no longer working for you or you find a different way to accomplish your goal, you can cancel the plan at any time.

Most credit card issuers will require that an account entering a debt management plan be closed. It may be in your best interest to reach out to creditors first and request that your accounts be closed. You may be allowed to keep a card for emergencies or business, though; ask before you sign up.

A debt consolidation loan would go into default. Again, the lender may send the debt to a collector. If you used a debt management program and don't keep up with the payments, you can get kicked off the program. However, if you call the credit counseling team in advance, they can help you make special arrangements.

Stopping payments on your bills (as most debt relief companies suggest) will damage your credit score. Debt settlement companies can charge fees. If over $600 is settled, the IRS will view this debt as a taxable income.