Cancel your debt management plan and start an IVA
You can cancel your debt management plan at any time and transfer to an IVA if you feel this is a better solution for you.
Included in this article:
- Why would you cancel your DMP and start an IVA?
- How to cancel your Plan
- What are the potential downsides?
Need help? Rather speak to a person? Call 0800 044 5407 or fill in the form below and we’ll call you
Why would you cancel your DMP and start and IVA?
There are various reasons why you might decide to cancel your debt management plan (DMP).
A major problem is the time it will take to become debt free. Most DMPs last for many years. In addition you may still be getting hassle from your creditors or they may still be adding interest to your accounts.
An IVA will resolve these problems. The agreement lasts for a fixed period (normally 5-6 years). After this your payments stop and any outstanding debt is written off. You are debt free. In addition, your creditors must also stop charging interest by law.
Starting an IVA will often help you become debt free far more quickly than a debt management plan. You also get legal protection from your creditors.
How to cancel your debt management plan
Once you decide to cancel your debt management plan the process is quite simple. All you have to do is stop making your payments. If you are paying by standing order or direct debit just instruct your bank to cancel the payment. Normally you should wait to do this until your IVA is in place.
Your debt management company will probably contact you to find out what is wrong. You are free to tell them you have cancelled because you are starting an IVA.
They may try to convince you to stay in your plan. However if your mind is made up there is nothing they can do to stop you. You do not have to give any notice. You can cancel immediately and there will be no financial penalties.
It is not wise to cancel your DMP until your IVA has been accepted and is in place. Keep making your payments to avoid the possibility of re-starting collections actions.
What are the potential downsides to stopping a DMP and doing an IVA?
Stopping your debt management plan and starting an IVA is not for everyone. There are some things you need to consider before making your decision.
An IVA is less flexible than a DMP. Normally you have to include all your unsecured debt and pay in all of your surplus income each month. In addition, there is an annual review of your income every year. If you can afford to pay more, your payments have to go up.
If you receive a windfall such as inheritance or a compensation payment during an IVA, this has to be paid into the Arrangement. You can’t decide to keep the money and use it for something else.
Home owner’s get legal protection from creditors. However you may also have to release equity from your property as part of the agreement to repay more to your creditors.
Get advice for us before deciding to cancel your DMP and start an IVA. Call 0800 044 5407 or complete the form below.
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