Rejected Debt Management Plan
A Debt Management Plan could be rejected if your creditors do not agree with it. What options do you have if this happens?
- Is your Debt Management Plan likely to be rejected?
- What can you do if a creditor rejects your Plan?
- What action can creditors take after rejecting a DMP?
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Is your Debt Management Plan likely to be Rejected?
A Debt Management Plan (DMP) could be rejected if your creditors feel you are not offering to pay them as much as you can. They will establish this by reviewing your income and living expenses budget.
They will check your expenses to make sure you are keeping them as low as reasonably possible. If they seem too high your Plan may be rejected.
The reason for this is that your expenses directly affect the amount of surplus income you have. If they are too high the creditors will believe the payment you are offering is less than you can afford.
Your creditors will be more inclined to accept your DMP if they can see you are keeping your living expenses to a reasonable minimum and therefore offering the maximum you can afford.
What can you do if a Creditor rejects your DMP?
If your DMP is rejected by one or more of your creditors you should not make any knee jerk decisions. Initially you should continue to make your proposed payment to each creditor whether they have agreed to it or not.
You should take time to review your living expenses. See if any savings can be made and you could increase your payment offer. If you feel this is impossible simply explaining your situation to the creditor again might help.
If you believe you are offering as much as you can afford you should not agree to increase your payments. If you do it is likely that you will be unable to afford the other payments that have been accepted. Your whole Plan could then fail.
DMP negotiations will often take a number of months. Some of the creditors you have included might agree immediately. Others may take longer 3-6 months to accept the plan.
What action can Creditors take after Rejecting a DMP?
Under the FCA guidelines a creditor cannot refuse to accept a payment towards their debt even if they have rejected your DMP offer. However they are allowed to take further collection actions against you.
At the very least they will continue to add interest to your account. This can be a real problem. It is likely to extend the length of your Plan considerably.
They may also apply for a County Court Judgment (CCJ) against you. This could then lead to other problems. If you are a home owner they could then apply for a Charging Order against your property. They could also apply for an attachment of earnings against you.
If your DMP has been rejected and you want to protect yourself against further creditor actions you may need to consider a more formal debt solution such as an IVA, Debt Relief Order or Bankruptcy.
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