Can I solve Credit Card debt with a Debt Management Plan
If you are struggling with credit card debt, a Debt Management Plan can help. It will get your debt back under control by reducing the monthly payments you make to an amount that you can afford.
Included in this article:
- Will your cards stop chasing you if you start a DMP?
- Is credit card debt written off?
- Can you still use credit during your Plan?
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Will your Credit Cards stop chasing you if you start a Debt Management Plan?
It can be very upsetting to receive threatening collection letters and phone calls about your credit card debt. A Debt Management Plan will help stop this.
Once the Plan is up and running and you have been making your payments regularly for 3-4 months, most credit card companies should suspend any action they are taking against you.
Maintaining your payments regularly does not guarantee that your credit card debts will stop their enforcement action for ever. If you stop your payments, they can start chasing you again. Even if you are maintaining your payments regularly, any of your creditors creditors can still further action against you if they wish.
In particular they might applying for a CCJ (County Court Judgment). If you are a homeowner, this could lead to you getting a Charging Order against your property.
Once credit card debt companies accept your DMP, it is unlikely they will take further action against you unless you do not make the agreed payments on time.
Is credit card debt written off by a DMP?
If you start a Debt Management Plan (DMP), your credit card balances will not be automatically written off. The Plan simply allows you to reduce your repayments.
However it can still be enormously helpful. This is because once it is agreed with your creditors they should freeze their ongoing interest charges. This could save you hundreds if not thousands of pounds which would have otherwise been added to your credit card debt.
It is possible that your creditors will agree to write off debt for you after you have started your Plan. If you have been paying regularly for at least 6 months you can offer them cash settlements. If you are able to raise sufficient funds, they may accept an offer of as little as 50% of the outstanding balance.
You could try to save this amount by putting away a little money from your living expenses budget each month. Alternatively you might be able to borrow it from family or friends.
Can you still use credit during a Debt Management Plan?
Any cards you include in your Debt Management Plan will normally be cancelled. As such you will no longer be able to use these. However because the Plan is flexible you do not need to include all of your credit card debt.
If you leave one of your account out, you can continue to use it as normal as long as you maintain the monthly payments.
Once you have started your Plan your credit rating will be negatively affected. As such it will be difficult for you to apply for any new credit cards.
Having said that there may be some lenders who are prepared to offer you a new card if you apply for one. These are sub prime lenders such as the Aqua or Vanquis which do lend to people with a poor credit rating. However you need to be aware that these cards charge very high rates of interest.
It is recommended that you do not continue to use credit cards while you are in a Debt Management Plan. Doing this could put your whole Plan at risk because you will struggle to afford the repayments.
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