Fraser Frayne Insolvency Practitioners Limited
Old Canal Cottage
Bath BA2 8BS
Tel: 01761 437754
DEBT MANAGEMENT PLANS
A Debt Management Plan (“DMP”) is an informal procedure under which a third party, usually a specialist Debt Management Company ("DMC"), will seek to negotiate an agreement between a person owing money ("The Debtor") and his (or her) creditors. The DMC will usually charge a fee in the region of 15% to 17% of receipts or payments for providing this service if a commercial firm. There are charity providers who do not charge for their services. In the first instance, if you requested help from this firm, we would provide you with details of a free-to-Debtor charitable provider.
The detail of what happens:
A simple DMP will be drafted and approved by the Debtor and then offered to creditors by post and email.
Under the Plan, the Debtor will be asked to make an affordable monthly payment to the DMC out of any surplus income, after living expenses. Once they have deducted their fees, the DMC will then offer a proportion of this monthly payment to each of the creditors, the actual amount being dependent on the relative size of that creditor's debt, (sometimes referred to as paying the creditors ‘pro rata’).
It should be noted that, whilst creditors may be prepared to accept a reduced monthly payment, they might not be prepared to stop any interest accruing on the outstanding amount or to waive other account charges. This is very important as, typically, a Debtor will be required to pay his creditors in full under a DMP, albeit over an extended period of time.
Furthermore, because it is an informal arrangement, creditors cannot be forced to accept a DMP and they may continue with any legal action against the Debtor.
The ability to implement a successful DMP on favourable terms is therefore dependent on a combination of the Debtor’s own personal circumstances, the attitude of the creditors and the standing of the DMC concerned.
Generally, a DMP is appropriate for individuals with total debts of less than £15,000 or for whom a Debt Relief Order is not possible, or for whom an IVA is not, at the time, possible or realistic.
This outline is general and may not apply to a specific Debtor’s circumstances for which a DMP may not be appropriate. The outline, views and suggestions set out are not intended to constitute professional advice, nor to be a substitute for specific advice.
© 2017 Fraser Frayne Insolvency Practitioners Limited
Registered in England Co. No. 6934426 VAT No. 972 6786 64
Registered Office: Old Canal Cottage Dunkerton Bath N E Somerset BA2 8BS
Company Secretary: Jan Bartoszewski; Directors: Matthew Frayne BA, FIPA, FABRP; Fraser Frayne-Watt
Licensed Insolvency Practitioner licensed by the Insolvency Practitioners Association
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