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How and Why Can A Debt Management Plan Fail?

This debt advice is available throughout the UK

 debt management plan or DMP is considered as a flexible solution towards your debt. However, it can still fail due to some circumstances. So, if you are thinking that your DMP can fail, do not hesitate to contact us as right away. We will give you the support you need in knocking down your debts.

If you are thinking that your DMP can fail, do not hesitate to contact us as right away. We will give you the support you need in knocking down your debts. In this guide, you will find out the common reasons why your DMP can fail.

What is failing debt management plan?

A DMP is designed to assist you to handle payments of unsecured debts at a rate that you can afford. It allows you to satisfy the essential living costs while managing debt payments.

Nonetheless, there are several means where it can lead to failure on your DMP:

  • You are in a struggle to suffice DMP payments
  • Your debts that are said to be priority debts are all on arrears
  • To adhere to DMP payments, you are cutting on other essential living expenses

If you are enduring any of the mentioned scenarios, you have to find means to effectively manage your situation. Your initial step is t reach out to the agency dealing with your DMP to review your current agreement.

Why can a DMP fail?

Each situation is different from the others, meaning there may be certain reasons why you could fail on a DMP. These are as follows:

Missed payments

Your reasons and circumstances of missing DMP payments might be different from the others. Whatever the reasons are you have to inform the credit counselling agency about your situation; otherwise, they will cancel the agreement when they are not informed why you’re missing payments

Inaccurate budget 

Your budget should be based on your current income. If there are changes in terms of income or expenses like a change of lifestyle or in the case of losing a job, this can impact your DMP. This is the reason why you have to create a complete budget list on a DMP. It’s also a good initiative to review your DMP at least once a year to ensure that your budget can suffice.

Missing debts

All your outstanding debts may it be secured or unsecured has to be included in your DMP. If any of these aren’t included, you’re expected to pay the usual monthly amount that you’re paying for that debt. This can impact your capacity to satisfy DMP payments. You have to inform the agency straight away and let them know that you missed a debt on your DMP.

No DMP review

Your DMP should be scrutinized by your DMP company r agency as per guidelines imposed by the FCA. This has to be done at least once a year. You must also respond during the review process; otherwise, they can fail or cancel your DMP.

Trouble managing money

Once you create a budget, you have to make sure it’s realistic and sustainable. Also, you have to live within your budget or your means. If you failed to spend wisely, it can be hard for you to fulfill DMP payments in the long run.

Getting additional credit

Your DMP may indicate that you cannot obtain additional credit while your paring existing debts. Once you do not comply with this, the agency can cancel the agreement.

Will my DMP fail if the creditor refuses my proposal?

After creating a budget with an organization like us, the proposal will be submitted to your creditors. In most cases, your creditors are likely to accept the proposal as it can ensure recovering the debt.

However, when your creditor rejects the proposal, this does not entail a failing DMP. Your creditor may prefer having the offer improved based on the financial details that you provided.

When this occurs, you just have to keep making payments that you can afford even when the creditor thinks you can give more. If your creditor does not accept the amount you can afford, you can your credit counselling agency for further advice. If in case, your creditor passes the debt to a debt collection agency, you must reach out to the counselling agency as well and inform them about it.

What to do for a successful DMP?

It can be easy to succeed in your DMP if you review your budget regularly and stick to it. This means avoiding unnecessary expenses to save money. You can also check for benefits that you can qualify to increase your income. For more debt advice on how you can fulfill your DMP, contact us!