Debt Management Company Closed
If your Debt Management Company what will happen to the money you have already paid towards your debts? What action should you take now?
Included in this article:
- Why has your Debt Management Company closed?
- Is the money you paid into your Plan safe?
- What happens to your outstanding debts?
- What action should you take now?
DMP Company Closed? Give us a call (0800 044 5407) or complete the form below to get advice from one of our experts
Why has your Debt Management Company closed?
There are different reasons why a Debt Management Company might close. The business may have simply decided it no longer wants to manage Debt Management Plans. If this is the case your details may have been transferred to another company.
Alternatively the company may have been forced to close. If the Financial Conduct Authority (FCA) believes the company is providing a sub standard advice service it will withdraw the company’s authorisation. It is then no longer allowed to offer DMPs to customers.
If your Debt Management Plan has been transferred you are under no obligation to work with the new company. You are free to change to a different fee charging or free provider if you wish.
Is the money you already paid into your Plan safe?
All the money you have paid into your Debt Management Plan so far should be safe. Any payments you made into your plan before the company was closed should have been paid out to your creditors in the normal way.
You should no longer make any payments to your Debt Management Company once you learn it is closed. You should immediately cancel any standing order you have set up with your bank. If your payment is taken from a card by continuous payment authority you should contact the bank and cancel this.
If you believe you made a payment to the company after it was closed do not panic. The money will have been paid into a ring fenced client account. As such it is not the company’s money. If the business has gone bust the liquidator will ensure the money is returned to you.
In accordance to FCA guidelines debt management companies should distribute money to your creditors within 5 days of receiving your payment.
What happens to your debts if your Debt Management Company has closed?
The fact that your Debt Management Company has closed does not mean your debts are written off. The balances remain outstanding and you are still liable to pay these.
If you are unsure what the outstanding balances of your debts are you should find out. The best way to do this is to contact all of your creditors and ask them. You can also use this opportunity to explain what has happened.
Many banks have given assurances to the FCA that if a debt management company closes they will allow a period of forbearance. This means that they will not take any action against you for at least 60 days to allow you to put a new payment plan in place.
You are within your rights to ask your creditors for some time to get a new plan in place to deal with your debts moving forward.
What action should you take now?
If your details have been passed to a different debt management company you do not have to work with them. You can use any other fee charging or free debt management provider if you wish. Alternatively there is nothing to stop you managing the plan yourself from now on.
You could also consider alternative solutions such as an IVA or even Bankruptcy. These options may not have been properly explained to you when you started your original Plan. Alternatively they may now be more suitable if your circumstances have now changed.
You must avoid doing nothing. Your outstanding debts still exist and will not go away on their own. Your creditors will restart their collection actions against you unless you take action.
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