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Pay your Debt in Full or Settle Early

Your Debt Management Plan (DMP) will finish when you have repaid all of the debt you owe in full or settled it with lump sum payments. When you start the Plan it is important to remember that you are simply agreeing reduced payments with your creditors. They are not automatically going to write off any of the debt you owe. As such your plan will continue until you have paid back or settled all of the debts that you have included.

When will your Debt Management Plan end?

Because your creditors do not automatically agree to write off any of your debt your Plan will last for as long as it takes you to repay what you owe. To get a rough idea of how long this will take you need to divide the total amount of debt in your plan with the total amount you pay back each month. This will give you the length of time in months. Divide by 12 to get the time in years.

This calculation only gives you an estimate of how long your Plan will last. There are other factors which could increase its length. The most common of these is that one or more of your creditors may continue to add interest and charges to your accounts. If you are making reasonable payments into your plan most creditors will eventually freeze interest. However there is no guarantee of if and when this will happen.

DM4U Tip: If you use a commercial debt management company to help you implement and manage your Plan you need to expect that they will charge you a management fee. The charge will often be around 15% of the payment you make into the plan each month. This will add to the length of time it takes you to repay your debt in full.

How can you reduce the length of a Debt Management Plan?

There are really only two ways that you can reduce the length of a Debt management Plan. This first is to pay more into the arrangement each month. This might be possible if your income increases or your living expenses fall. As a result you will have additional surplus income which you can then add to your Plan payment.

The other option is to settle one or more of the debts included in your plan early. This can be done by offering the creditor a cash lump sum in return for them writing off the remainder of the debt. In this way you could get agreement for 50% or more of your debt to be written off.

Of course you need to have access to cash in order to be able to offer any of your creditors a lump sum settlement. You might be lucky enough to be able to borrow this from a family member or friend. Alternatively if your income does improve you could save any extra surplus income. When the amount you have saved is sufficient you can then use this offer a settlement to one or more of the creditors in your Plan.

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