How to start a DMP
If you have made the decision to start a DMP (Debt Management Plan) you now need to understand how to go about putting it in place. There are various steps you will need to go through to get your Plan up and running. Because a DMP is an informal agreement there is nothing to stop you carrying these out yourself if you wish. However for many this can be a daunting and time consuming task. As such you also have the option of using a third party debt management service to help you.
Government Advice about Dealing with Debt
As well as the information found on this website the Government’s Insolvency Service has produced a useful guide to personal debt solutions which you might also find useful: “In Debt – Dealing with your creditors”.
The Money Advice Service (MAS) are an independent service set up by the Government to provide people with free advice about all aspects of personal finances. For help from MAS if you are struggling with debt please follow this link: MAS – Help if you are struggling with debt.
It is also recommended that you read this one page document produced by MAS entitled “Dealing with debt – 5 things you should know”.
How long does it take to start a DMP?
Generally speaking a Debt Management Plan can be implemented very quickly. You first need to provide information about your financial circumstances to your creditors. Once you have done this there is no need to wait for them to agree the payments you have offered. You can start making these and reduce your outgoings straight away. If the offers you have made are reasonable your creditors may agree to them immediately. However it may take some of them a number of months during which time they could continue to make additional payment demands. If any of your creditors do not agree you can continue to pay them the reduced amounts you originally offered regardless. However they may continue to add interest and late payment charges to your accounts.
The steps needed to start a DMP
There are a number of things you will need to do to start a DMP. These include completing a financial statement which helps you understand what you can afford to pay towards your debts. You may also need to open a new bank account if you owe money to your current bank. You then need to propose reduced payments to each of your creditors based on what you can afford and get agreement to these. Of course you then need to make sure that you make your reduce payments on time each month. Finally you should keep your creditors up to date by giving periodic updates about your financial situation and ability to pay.
Debt Management Plan Living Expenses Guide
One of the most important parts of your Debt Management Plan financial statement is your living expenses budget. This is a list of all the things you need to spend money on each month. It is critical that you get your budget right because you will be expected to pay 100% of any money you have left over from it into your Plan. There are a wide range of living expenses you should include in your budget from money for your mortgage or rent, and housekeeping to paying for your car to children’s school expenses and pocket money.
How to start a DMP Yourself
Because it is an informal agreement there is nothing to stop you negotiating with your creditors yourself and managing your own Debt Management Plan. This is possible to do if you are well prepared. You also need to be organised to make sure that your reduced payments are paid to each creditor regularly and on time each month. If you only have one or two creditors starting and then managing a DMP yourself can be a relatively simple task. The more creditors you have the more difficult and time consuming it becomes.
Start a DMP using a Debt Management Service
You may have a long list of creditors and do not have the time to negotiate with each of them. Alternatively you may be worried about having to deal with them all yourself. Whatever the reason if you do not want to implement a Debt Management Plan yourself you can use a debt management service provider. You can use either a commercial debt management company who will charge you a fee or a free to consumer service. On the face of it you may think that getting a free service is the best option. However it is worth considering the features of both types of service before making your decision.
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