DMP Term

[UpToMyNeck]

Hi All,

My partner has A DMP with Baines & Ernst, and in her original paperwork it stated that if she paid her DMP through them, it would be completed by April 2008. She missed a couple of payments along the way as a result of unexpected expenditure, but she rang them yesterday to confirm when it ended, as she was excited to think that in another 6 months or so she would be debt free. However, B&E have told her that as her creditors have recently lumped some interest on, she must now continue her payments for another TWO YEARS!! She is absolutely devastated as she feels she has taken a huge step back in her bid to become debt free. B&E say that creditors have now stopped adding interest. but is this normal for them to just lump a load on, and then say they will not add any more, and more to the point, should B&E have not informed my partner instead of letting her think she was only a few months away from completion of the DMP?? Advice greatly appreciated.

[UpToMyNeck]

Sorry, that should have said her original agreement would have been completed by April 2009 not 2008! Stuck in a timewarp! [:D]

[MelanieGiles]

As a DMP affords no protection from creditors charging ongoing interest, I am afraid that your partner will have to carry on until the debts are repaid in full. This is one of the downsides of a DMP - and I feel that the company ought to have warned her about his as soon as they became aware that completion could not take place by the time they had originally indicated.

[plasticdaft]

Whats to stop the companies just adding more interest on when the end is in sight again??

I really cannot see why anyone would enter into a DMP where no one has to play by any rules.(except the person in debt!!!)

[Andrew Graveson]

There can be issues where payments are missed. If a creditor company has extended a concession of freezing interest and accepting a reduced payment this agreement will naturally be broken if the reduced payment is missed.

At this point it's very likely that interest could be added again which can/will extend the term.

The hope would be that the situation could be re-addressed with the creditor and the concession be established again though this might take a little time and therefore result in a longer term.

[UpToMyNeck]

When I have examined the paperwork for my partners DMP, hardly any of the allowances Melanies team covered with me when discussing my IVA proposal have been allowed for, which explains why she has been struggling to meet the payments, and also why she is so distraught at the idea that she is going to have to carry on like this for at least another 2 years. Things like smoking, dentist, opticians, hobbies, have not been taken into account, and since she set it up, her domestic situation has changed. Not necessarily for the better, coz she's now living with me [:D] but it means that her expenditure is very different now from when she set the DMP up. Would it be better to submit a revised breakdown of I&E to B&E so she doesnt end up in A&E?! [:D]Sorry, just in one of those moods. [:p] Or, can she move the whole DMP over to another IP and start again from scratch with a more realistic monthly payment? All comments gratefully received...

[Cybus]

Whats to stop the companies just adding more interest on when the end is in sight again??

I really cannot see why anyone would enter into a DMP where no one has to play by any rules.(except the person in debt!!!)

That is an interesting point. I'm not familiar with the workings of a Debt Management Plan but would be interested to know how the interest thing works.

Do creditors agree to freeze interest, period?

Or just for a set period of time?

When discussing a debt management plan was your partner advised that there debt would be cleared by a certain date and that was that? Or were they advised that the debt would be cleared in a certain amount of time providing certain criteria were met, presumably one of them being that no payments were missed?

I am trying to figure out how someone entering in to a debt management plan can be advised that they are eventually going to be debt free when they cannot be given a cast iron guarantee that further interest and charges can be applied by the creditor at anytime.

I don't see a debt management plan as an effective way of attempting to clear debts. Surely they can only be a short term thing for people experiencing short term cash flow problems?

Has anyone any knowledge of a debt management plan that has successfully cleared debts in full? I wonder how long it took? How much the original debts were? and how much was repaid to clear those debts?

[UpToMyNeck]

It states in her original letter that they will be cleared by April 2009, it doesnt mention any "but if's" but as a DMP is not a legally binding contract (an IVA is), even if the creditors agree to waive interest it appears they can change their mind at a later date if they are having a particularly bad day. My girlfriend missing some payments no doubt constituted a bad day, so they have added some interest. Her DMP provider says that no more interest will be added, but I assume this is on the basis she doesnt miss any more payments, which is fair enough, it just would have been nice for her to be able to finish it in April next year. Then she could have taken me out more often! [:D]

[johnh]

I think Andrew answered the issues raised by Plasticdaft and Cybus in another thread (can't find it at the moment!). The operative word in a DMP would seem to be MANAGEMENT. Since each creditor may allow a interest freeze (or not) for a different period of time in order to re-assess any changes in the debtors circumstances, it then becomes incumbent on the DMP provider to keep on top of things and re-negotiate the interest freeze throughout the DMP. This doesn't seem an unreasonable thing for the creditors to do and doesn't mean the arrangement is entirely at the whim of creditors. Nor do I think it is just a short term answer to temporary financial embarrassment. There must be many debtors who want to repay their creditors but cannot purely because of the massive APR on many credit cards or who may have good reason to suppose their situation will improve in the future. Had it been a realistic option for us, I'm sure we would have chosen a DMP. Problem is that we like many allowed things to get far beyond the stage where we could ever fully repay our debts.

[Andrew Graveson]

Debt management companies are now required by the Office of Fair Trading to include an estimate of term in their communications with a potential client prior to commencement. They are also required to disclose the assumptions that underly the term estimation.

These assumptions might include that all payments are made, that interest is frozen, etc etc.

I'm sad to see that proper allowance wasn't made for expenditure in the UpToMyNeck's partners DMP. That must be the single biggest reason that DMP's fail and therefore is in no-one's interests (especially creditors). Proper expenditure allowances are vital to maintain arrangements.

Moving a DMP to another company is possible though disturbance of existing arrangements (i.e. avoiding disturbance) should be considered.

I respect that Cybus has a negative view on DMP's. It's not the view held by the majority of experts on this site however as most would acknowledge that in many cases it's the best (and sometimes the only) way to deal with unmanageable debt. All comes down to an individual's circumstances and standpoint.

[UpToMyNeck]

Thanks Andrew. Do you have an example I&E form that I could ask her to complete to send off to Baines and Ernest to demonstrate that her current level of payments are not affordable? I want to ensure she claims for all the allowable expenditure that is relevant to her, and not just the ones B&E have suggested when the thing was set up.

[MelanieGiles]

There is definately a place for Debt Management Programmes in the insolvency world - and there must always be an element of choice for the client as well - the trick for any professional, regardless of discipline, is to ensure that good allrounded and balanced advice is provided about all options to enable that choice to be exercised.

[Andrew Graveson]

Hi UpToMyNeck,

I do have something that could be useful but I'll need to email it to you as it isn't available via a weblink.

If you'd like to contact me and let me have a contact email address I'll see it gets to you. Our contact details are on the profiles page.

[UpToMyNeck]

Thanks Andrew, I've just sent a request to you by email.

[Andrew Graveson]

Reply on the way!