Debt Management Plan | Chiltern Debt Management

A debt management plan can be a useful debt help solution for people struggling with their consumer debts, but what are they, how do they work and who is eligible?

What is a debt management plan?

It is an informal arrangement between you and your creditors (the people you owe money to) and it allows you to repay balances at an amount that is more affordable to you. They generally allow all unsecured balances, like overdrafts, personal loans, store card and credit cards, to be gathered together into one single payment, which is then spread out over a longer payment term – thus making repayments easier.

How does a debt management plan help?

A debt management plan allows you to take control of your finances, whilst still repaying debts but at a more affordable rate. We work out how much you have available to repay to creditors, after your living costs and priority payments have been accounted for. You then pay this amount to us, and we distribute this amongst your creditors on a pro-rata basis. This means that all of your different debt repayments will be accounted for in the single monthly payment that you make to us.

You also don’t have to worry about phone calls and letters from your creditors, as we’ll take care of all correspondence and keep you up to date with any progress. Plus, we negotiate with your creditors to reduce or freeze interest and charges from being added to your accounts. Whilst we cannot guarantee that this will happen, a successful outcome can be usually achieved in most cases.

Who is eligible?

Anyone that is struggling to manage their current credit commitments can apply for a debt management plan. The term “struggling” typically means that you cannot afford the minimum contractual payment, once your priority payments (like mortgage/rent, utility bills, council tax etc) and general living costs have been accounted for. Living costs include travel to and from work, food, clothing and an allowance for telephones and satellite package etc, but doesn’t include unnecessary items like gym memberships, magazine subscriptions and other luxury items.

To qualify, you must also be struggling with unsecured consumer debts. If you have secured debts aswell, like a mortgage, car hire purchase or a secured loan, we can make allowances for these items on your financial statement. We cannot include these secured debts on your plan, but we can allow you enough disposable income to repay these priority debts yourself.

What are the alternatives?

We offer a full range of solutions to help you financially, and some may be more suitable for you than others. Our advisers will go through each of the available options with you, based on your individual circumstances, so that you can make an informed choice. The alternative solutions that they may offer include;

Individual Voluntary Arrangements (IVA) or IVA advice
Trust Deeds
Debt Consolidation Loans

Fees & Information

We cannot guarantee a reduction in interest or charges. If an IVA is not maintained it could lead to bankruptcy. Whilst initial debt advice is free, fees will be charged if a solution is taken out.

Fees related to Debt Management Plans are in two parts;

"Initial Fee" means your first two "Monthly Payments", which is paid by You to "Us". This represents our fee for establishing your arrangement, and therefore is not distributed to your creditors, and can be paid in two separate instalments. Retention of this fee will put you into further arrears.

"Monthly Fee" means the Fee payable for our Services each month. This is an amount equal to 17.5% of your "Monthly Payment" (apart from your first two "Monthly Payments" which is the "Initial Fee"), subject to a minimum payment of £30 for disposable incomes of 0 - £100, and £35 for disposable incomes of £100.01 - £200.

Fees incurred for Individual Voluntary Arrangements are variable dependent upon the monthly contribution to the arrangement and the agreement that is reached with your creditors. Fees are made up of Nominees fees relating to assistance given to prepare your proposal and Supervisor fees which relate to the ongoing monitoring of your IVA. Fees are already included as part of your monthly contribution. The level of fees and the method of payment are both agreed by your creditors at the outset of the arrangement.

A record of your agreement with us will be held on your credit file for up to six years, and your ability to obtain credit in future may be affected.

You are provided a cooling off period of fourteen days from the date the agreement was deemed to commence, during which you may cancel our agreement. Should you give notice to us that you would like a refund of a payment, or payments, (being other than the initial fee) then where no distributions have, at that time, been made by us, or are in the process or course of being made by us, in respect of that payment or payments this will be made in full (i.e. without deduction of our fee of 17.5%).