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Review your financial circumstances regularly

You should regularly review your financial circumstances during your Debt Management Plan (DMP). Your creditors will normally expect you to provide them with a update about your situation every 6 to 12 months. They want to understand whether or not your circumstances are improving and if you can increase your payments.

What of your circumstances stay the same?

If you believe your financial situation has not changed you should still review your circumstances once every 6 months and inform your creditors. You should review your income and expenditure statement to confirm that all the figures are the same.

You should write to each of your creditors explaining that nothing has changed and include a copy of your income and expenditure statement. Ask each creditor to continue accepting the reduced amount you have been paying. In the light of this situation you should also ask them if they will continue to freeze interest and charges.

It is very important to maintain an ongoing communication with your creditors in this way. They will   be happy that you are keeping them up to date. As a result they should continue to accept your reduced payments and continue to freeze interest and charges.

What if your circumstances change?

If your income has increased or living expenses decreased you should update the figures in your income and expenditure statement. If as a result you now have more surplus income this means that you could increase the payments you make towards your debts. It is in your interest to do this as it means the debts will be paid off sooner.

If your circumstances have become worse perhaps because your income has fallen it means you will no longer be able to maintain your agreed Plan payments. You need to update the figures in your income and expenses statement and calculate a revised payment schedule. You will then need to write to your creditors and explain the situation. You will have to ask them to accept further reduced payments in light of the change.

DM4U Tip: If your circumstances change you can tell the creditors immediately. You do not need to wait until 6 months has passed since the last time you gave them information. You should also take time to consider whether a Debt Management Plan is still the best solution for you or whether an alternative debt solution would now be more suitable.

If your income increases do you have to tell your creditors?

Because a Debt Management Plan is an informal agreement with your creditors you are not under a legal obligation to tell them if your situation improves. Of course the more you pay each month the faster your debts will be paid off. As such informing your creditors and increasing your payment is never a bad thing. However if you have a pressing need to spend the extra money on something else there is no legal reason preventing you from doing this.

You could also consider saving any extra money you receive. Once you have saved a sufficient amount you could then use this to settle one or more of your debts early. You do not necessarily have to pay each debt in full. Very often if you can offer 50% of the balance owed as a cash lump sum the creditor will write off the other half. This would mean that that you pay off your overall DMP much faster.

DM4U Tip: If you can now afford to pay more towards your debt you should also review your options and consider if an alternative debt solution might be better for you. It is possible that you now have sufficient surplus income to apply for an Individual Voluntary Arrangement which might mean that you become debt free sooner.

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