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Debt Questions - Debt Management Plan FAQsWhat is a Debt Management Plan?If you live in Northern Ireland and are struggling with debt a Debt Management Plan might help you out of debt. A Debt Management Plan also known as a DMP is an informal agreement for residents of Northern Ireland designed to allow a person who is struggling to meet their monthly debt repayments the opportunity to make a single more affordable monthly payment via a debt management company. In return for a management fee the company passes these payments to the debtors creditors until the debts are cleared. The most important part of the management companies duties should be to negotiate an interest and charges freeze on the debtors outstanding accounts and then regularly ensure that creditors continue this freeze during the term of the DMP. They should also ask creditors not to take any legal or recovery action providing the debtor keeps making their regular payments. Amongst their duties the management company also agrees to handle / reply to creditors letters and enquires. Is a Debt Management Plan a loan?A Debt Management Plan is not a loan, you are paying back you debts at a rate you can afford. Will I be credit checked?Since a debt management plan is not a loan you will not have to be credit checked. Will I keep getting letters and phone calls from my creditors?It is highly likely that you will still receive letters and phone calls from your creditors as the Debt Management agreement reached is informal and therefore not legally binding. However, these letters and calls should become less frequent the longer the plan is in place and the creditors realise they are receiving regular payments. Can I pay more or less if I want to change payments?Because the plan is informal you can alter your payments to suit your circumstances. If your circumstances change you can raise or lower your payments. Obviously the more you can pay back regularly the quicker you will be able to pay of your debts. Do I need to change banks?If your current bank is one of your creditors then you should change your bank to one that you do not owe any money too. If you fail to do this there is a possibility that when your wages are paid into your current bank account they will keep your money and offset it against what you owe them. Do I need to cancel my direct debits?You should cancel your direct debits to your creditors to avoid the possibility of them being paid twice. However, you should continue to pay your normal household bills, car insurance etc. How will I know my creditors are being paid?You will continue to receive statements from your creditors showing the balance on your accounts. This is your opportunity to confirm they have frozen the interest and charges on your accounts. Will this affect my credit rating?It is more than likely that the management plan will have an effect on your credit rating as you will not be making your contracted repayments. However, if you are seen to be making regular payments through your plan then this should have a positive effect on your credit rating. You should bear in mind that if you are currently experiencing debt problems it is a possible that one or more of your creditors may have already recorded this information with a credit reference agency such as Equifax or Experian. You can check your credit arting by visiting their websites. Does it make a difference if I am a homeowner?It makes no difference in a Debt Management Plan whether you are a tenant, homeowner or live with your parents.
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