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Citizens Advice Debt Management Plan

If a consumer is struggling to pay off his/her debts and facing difficulties to deal with the lenders, a debt management plan might help to control their finances. This will allow the consumer to make a single payment monthly towards their unsecured debts and arrears based on what they can afford.

Generally, the debt management plan shows the creditors that the consumer is willing to make payments they owe. Therefore, it is the most affordable way to manage debts. However, there are certain risks included.

For further information regarding the Citizens Advice Debt Management Plan, keep reading and try to pay all of your debts as soon as possible.

What are the Priority and Non-priority Debts?

Here, you are going to differentiate what are the priority and non-priority debts. So, let’s discuss these debts:

Priority Debts:

Below is the list of priority debts when it comes to understanding the Citizens Advice Debt Management.

  • Electricity and gas arrears
  • Rent and mortgage arrears
  • Magistrates’ court fines
  • Council rate and tax arrears
  • Arrears of maintenance owing to an ex-partner
  • TV license or TV permission arrears
  • VAT or income tax arrears

These all are known as the priority debt. Therefore, the consequences of not compensating them can be more severe than the other debts. 

Moreover, consumers can’t involve these debts in the Debt Management Plan (DMP). Therefore, they have to ensure that they have got a reliable deal with the priority debts before setting up a DMP program.

Non-priority Debts:

The non-priority debts are less crucial as compared to the priority debts. So, the non-priority debts involve credit cards, bank loans, water changes, student loans, and benefits overpayments.

What is the Citizens Advice Debt Management Plan?

Citizens Advice is one of the registered charities in the UK that offers free and secured advices to the debtors. They often suggest various debt management plans to the people to get rid of their situation easily. 

Whenever Citizens Advice suggests any DMP, it is a contract between a borrower and their lenders in order to compensate for all the debt amounts. The debt management plan is only valid for these borrowers under some specific circumstances. 

So, the consumer has debt related issues but, he or she will be able to make the compensation after a few months. Otherwise, the consumer can pay a small amount to the lenders each month.

Generally, the DMP’s are controlled by a Debt Management Plan provider. These providers deal with the lenders or creditors on behalf of the borrower. Thus, the consumer does not require to directly deal with the creditor. 

Actually, DMP is not legally binding. Therefore, as these consumers are not tied in for a certain period, they can cancel the plan or program anytime.

Is a Citizens Advice Debt Management Plan Right for you?

A debt management plan might be a good deal if the following applies for the consumer:

  • He/she is able to pay back the monthly compensation on the priority debts such as council tax, rent, mortgage, and living cost. However, the person is struggling to keep up with the loans and credit card.
  • If the consumer like to appoint someone else in order to deal with the lenders on behalf of him/her.
  • Dealing with a single compensation each month will help the consumer to set his/her budget.

How the DMP will Impact the Consumer?

If you consider this scheme, the influence of a Debt Management Plan might include the following:

  • This might take longer to compensate for the debt amount as the consumer will have to pay a small amount every month.
  • The lenders won’t significantly suspend the charges or interest on the debt. Therefore, the amount the consumer borrows may go down beyond what he or she thinks.
  • The Debt Management Plan provider can ask you for a certain fee, despite there are multiple free providers. Therefore, consumers do not need to pay money if they do not want to.
  • The lenders might stop initiating any contact or refuse to cooperate with the consumer.
  • The Debt Management Plan (DMP) will be displayed on the credit report. 

Moreover, it will be quite difficult for the consumer in order to increase the credit report as well as the score in the near future.

Reliable Steps to Get a Debt Management Plan

Once a consumer decides to get a Debt Management Plan, they need to follow the underlying dedicated steps in order to apply for it.

  • The consumer needs to be sure that they are conserving their priority debts.
  • Work out on the budget so the borrower can estimate if he or she has sufficient income to make monthly compensation.
  • Try to find a freeware Debt Management Plan provider organization.
  • Before making any kinds of plans, try to review the contract and agreements carefully.

Influence of the DMP on Credit Rating

After a consumer gets in a DMP or Debt Management Plan from Citizens Advice or any other organization, this might impact their credit result. Actually, the DMP will show up on the Credit reference file. This might decrease the chance if the consumer applied for a Debt Management Plan. 

However, if a consumer makes payments with the DMP, it will impact positively on the credit file than the unpaid debts.

The entire details might also stay on the credit reference file for some time. However, once the DMP expires, the consumer might struggle to get credit for a certain time afterwards.

How do the DMP Providers Work?

Any DMP provider should be authorised by the FCA (Financial Conduct Authority) for debt counselling or adjusting. It is applicable for all DMP providers whether they are charging a fee or not. 

The Financial Conduct Authority sets out certain standards for DMP providers across the UK. These minimum standards involve:

  • Not misleading the consumer
  • Transparency regarding their fees and charges
  • Not cold-calling the consumers
  • Provide all the necessary details to the consumers

Ideas Given by DMP Provider

Here are the prominent ideas or advice given by the Debt Management Plan provider.

  • A realistic appraisal of the financial situation
  • Reviewing the income
  • Check the outgoings
  • A copy of the financial statement that is rendered by the credit bureau
  • Warning regarding what will happen when the borrower stops making compensation each month
  • A proper explanation of why the debt might increase 

Other Debt Rules

Debt Management Plan providers should follow other rules involving:

  • Referring to the borrower or consumer to not-to-profit advice agencies for further assistance, if it is applicable.
  • Keeping the details up-to-date regarding the result of the negotiations with the lenders
  • Reply to any report or complaint promptly and fairly
  • Render the account statement if prompted
  • Updating the consumer with any developments or anything else that might affect the credit report or result
  • Provide copies of any accord and keep all the required details unless the agreement ends.

So, before inquiring the debt management plan with Citizens Advice, make sure their line of work matches with points discussed above.

Important Queries Regarding the Citizens Advice Bureau Debt Management

Go through the undermentioned questionnaires in order to get more clarity on the Citizens Advice Bureau Debt Management Plan.

  • How Long Does a DMP or Debt Management Plan Last?

Generally, the Debt Management Plan can last as long as 12 to 15 years. But in most cases, it is relatively rare. When a consumer realizes that he or she can’t make the debt payments within a certain time, then it is worth considering another debt solution such as bankruptcy, or Individual Voluntary Arrangement (IVA).

  • What are the Major Disadvantages of a DMP or Debt Management Plan?

There can be multiple disadvantages to the Debt Management Plan. Some of the prominent factors involve:

  • The debt amount must be compensated in full. But, they will not be written in the contract or agreement.
  • Lenders do not have to access a Debt Management Plan and still prompt the consumer for instant repayment.
  • Mortgage and any sort of secured debts are not included by the Debt Management Plan or program.
  • Can Lenders or Creditors Refuse the Debt Management Plan?

Obviously, creditors or lenders can easily refuse any sorts of Debt Management Plan. But, they are not allowed to decline a debt solution. However, they can accept the Debt Management Plan if it is from a reliable provider. 

  • Which is Better, DMP or IVA?

The IVA is less compatible than the DMP. Despite this, you can still vary the payments up to 15% on an IVA. Any large variations might have to refer to the lenders to vote on the final decision. According to most of the consumers, the Debt Management Plans are more flexible than the IVA’s. Therefore, the consumer can change the payments whenever required.

  • Will a DMP Affect my Job?

Certain debt solutions can put your employment prospect at risk. Especially, when a consumer is in a position of financial responsibility. But, a DMP is less formal, so it won’t influence the job. Therefore, whenever a consumer falls into a debt related issue, he or she can look for a reliable debt advisor.

  • Can a Consumer Get a Credit Card while on a Debt Management Plan (DMP)?

The goal of the Debt Management Program is to ensure that there are no more debts remaining. However, issuing a credit card when a consumer is in a Debt Management Plan, makes it quite difficult to execute the goal properly. But, the consumer can still use the credit card when he or she is in an emergency situation.

Disclaimer: This website nationaldebtlines.co.uk is in no way related to Step Change Debt Charity or approved by the Government. However, the product (IVA) which we specialise in, is processed and managed by Insolvency Practitioners under the following legislation: The Insolvency Act of 1986 (amended by the Insolvency Act 2000 and the Enterprise Act 2002) introduced a new procedure whereby a debtor could come to an arrangement with his/her creditors to pay his/her debts in full or in part over time as an alternative to bankruptcy.
The Insolvency Service, an independent government agency, has produced a guidance leaflet on dealing with your creditors. In some cases and with some debt solutions a proportion of debt can be written off. The amount written off will depend on your circumstances, income, level of affordability, assets and the current write-off policy of your creditors.