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Options if your debt management plan is rejected

Options if your debt management plan is rejected

A debt management plan could be rejected if your creditors do not agree with the reduce payment amounts you have offered. What options do you have if this happens?

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Need more advice? Give us a call (0800 044 5407) or complete the form below to speak to one of our experts

Can your debt management plan be rejected?

A Debt Management Plan (DMP) can be rejected by any of your creditors if they feel you are not offering to pay as much as you can. They will establish this by reviewing your income and living expenses budget.

They check your expenses to make sure you are keeping them as low as reasonably possible. If they believe the amounts you have included are too high, they are likely to reject your payment offer.

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 assume 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 are therefore offering the maximum you can afford.

What happens if a creditor rejects your payment offer?

Under the FCA guidelines a creditor cannot refuse to accept a payment towards their debt even if they have rejected your DMP offer. However, after they can continue to take action against you.

Most commonly, they will not agree to freeze the interest they add to your account. This would be a real concern as it is likely to significantly extend the time it takes to repay what you owe.

They may also continue with legal enforcement actions such as applying for a CCJ (County Court Judgment) against you.

If a CCJ is issued, it can then lead to more serious problems. If you are a home owner an application can then be made for a Charge against your property. Alternatively, you could get an attachment of earnings where payments towards the debt are taken directly from your wages.

What are your options if a creditor rejects your Plan?

If your DMP is rejected by one or more of your creditors, don’t 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.

Review your living expenses budget to see if any savings can be made. If so, you could increase your payment offer to a level which might be acceptable. But don’t agree to increase your payments to an unsustainable amount. If you do, it is likely that you will be unable to maintain the agreement and it will fail.

Given it’s impossible to increase your payment, you should look into using a different debt solution.

First, consider an IVA. This option requires a minimum payment of £100/mth. Sometimes, creditors are more willing to accept an IVA because it is a more formal agreement.

You should also think about going bankrupt. One of the major advantages of this option, is that you don’t have to make any further payments towards your debts if you can’t afford to. The balances are written off. If you are not a home owner, you may have nothing to lose.

If your debt management plan has been rejected and you need more advice, give us a call (0800 044 5407) or complete the form below. Its free and confidential.

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