Frequently Asked Questions
Listed Below are the most frequently asked questions concerning Debt management and IVA's.
If there isn't an answer to a question you have, please feel free to contact us.
Pre-Contract Information Guide to Debt Management & IVA's
How to contact us
It is easy to talk to a member of staff at Debt Stop Direct. Contained within the pack will be your personal debt management advisors details. This will include their full name, telephone number and email address. They will be happy to answer any queries you may have or explain any aspect of the plan you aren’t sure of. Alternatively you can simply call free phone 0800 634 3058.
What if circumstances change
A debt management plan is an informal arrangement, meaning any change of circumstance can easily be accommodated. At any point we can change the arrangements if a more suitable solution is available.
What happens to funds held if you cancel
If this happens within the initial cooling off period we will refund any money we are currently holding. If you cancel after this period we will refund any money we haven’t distributed to creditors minus our fees for working on your account. We will not charge any penalty fees or charges.
Will Creditors always accept reduced payment offers
Nothing can be guaranteed on a debt management plan as creditors are not currently legally obliged to accept any offer we put forward. However we do have vast experience in the negotiation process and also find our relationship with the various creditors means we can boast a success rate of agreeing a reduced monthly payment in over 90% of cases we take on. You can rely on our experience and creditor relationships to provide the best possible service for you.
Will creditors continue to pursue me for payment
Again there is nothing a debt management company can currently legally do to stop creditors contacting you regards your debts. However once we have an agreement in place you will find that communications between yourself and your creditors largely stop. Once we inform a creditor we are dealing on your behalf we request that communications are directed through ourselves, this takes the pressure off of you and allows us to deal directly with them. Any communications we have with them will be reported back to you on a regular basis. If creditors do keep chasing you directly we provide prepaid envelopes so that you can send any correspondence to us and we also provide the details of your client liaison manager for you to pass on to them. If you receive any unwanted contact please keep us informed and we will always endeavour to ensure this is minimised on your behalf.
We would advise that anyone still banking with a creditor being dealt with on the DMP to change bank accounts, so to avoid the creditor withdrawing funds from your account, if you have any questions about this please feel free to call us.
Is a credit check required
As we are not lending you any money, we are not required to check your credit file.
Will my Credit Rating be affected by the plan
Unfortunately in the short to medium term your credit rating can be adversely affected. This is because by joining the plan you are breaking the contractual repayments on your unsecured debts. However you may already have a poor credit rating if you have arrears or a history of missed or late payments. Indeed should you continue to struggle and potentially miss payments through a lack of affordability the effect on your credit file could be equally severe if not worse, than the effect imposed by joining the plan. Your credit file can be effected for up to 6 years after the completion of the Debt Management plan.For more information about the affect on your credit file please click this link
Will joining the plan prevent creditors taking further action
As a company no guarantees can be made that further action will not be taken. This may include court action to recover outstanding debts. However if this does happen we will immediately respond on your behalf to help make repayments affordable for you.
Can I take out a plan if I am a homeowner or tenant
It makes no difference at all whether you are a homeowner, tenant or even living with parents. You can take out a debt management plan under any circumstances.
Do I need to be in Full Time Employment
In respect to employment all we require is that you have additional income above your basic living costs.
Is this a loan
We are not money lenders and we won’t pay off your debts. Our plan allows you to repay your creditors at a rate that is affordable to you. If you fail to keep up plan repayments we can’t make payments to your creditors.
Will I receive a Default Notice
By starting a debt management plan you will be in default on your original credit agreement therefore allowing your creditor to issue a Default Notice. Different creditors react differently to this situation and therefore no guarantees can be made as to whether a default notice will or wont be issued.
Will CCJ's affect being on a plan
This will have no effect at all. You can even use the plan to make payments against any CCJ's that currently exist against you. All we ask is you are honest from the beginning and make us aware of any judgments against you.
Will other family members find out about my debts
Although we feel it is best to be open with partners, legally we only need them to know if the debts are shared or you need to take into account your partners income to support the plan.
What is the difference between Secured and Unsecured Loans
Simply put a secured loan is secured against assets that you own. (e.g. car or property) An unsecured loan is not secured on your assets (e.g. personal loan, credit card).
Will the payment plan cover all my debts
Unfortunately a debt management plan can only cover unsecured debts and arrears.
It is important that you give priority to other debts that will have more serious consequences if regular payments are not maintained. This type of payment must be made directly from you. Examples include rent or mortgage, loans secured against the property, utility bills and HP agreements.
When we start assessing your finances we will take into account these priority debts and an allowance for day to day living. From this assessment we can calculate what you can realistically afford to pay each month.
How is my money collected and distributed to my creditors
You can make payments to us in any of the following ways:
• Card Payments
• Cash
• Postal Order
• Bank Transfer
• Giro
• Standing Order
• Cheque
Once the payment reaches our account we will distribute your monthly payments to your creditors for you, along with deducting our monthly management fee. If we are unable to collect your payment we will not be able to pay your creditors.
How long will it take before I am debt free
This obviously depends on individual circumstances, but because you are making reduced payments to creditors the time period will be extended. By repaying the debt over a longer period you may have to pay an increased total amount. During the initial consultation this will be explained to you along with an estimate of how long the plan will need to run for. What we must stress is that a debt management plan is not an overnight solution and will require commitment from you to keep up the lower repayments. We would also stress although we do review your finances on a regular basis if you find your affordability changing, either through increased or decreased affordability let us know, as by altering your payment amount, you will also see a change in the estimated plan duration.
Debt management cooling off period
You have a cancellation right which is sent out in the written information sent to you. You are also entitled to a 'cooling off' period, which ends seven working days after you receive your contract documents. If you change your mind during this cooling off period any monies paid will be returned to you with no charge being made
How much will debt management cost me
We charge an initial fee equivalent to the first two months payments. This is used as our set-up fee and covers our administration costs. If you continue to make your payments and see the plan through to completion, a sum equal to the first two months payments will be used as the final installment as a gesture of goodwill from ourselves. This may result in a delay of up to two months before your creditors receive payment. However it can take four to six weeks to put in place agreements with your creditors. This may cause your account to move into arrears or further into arrears. Each month we will take a monthly management fee for working on your account. This is 17.5% of your monthly payment but subject to a minimum fee of £30.00 per month. All costs will be notified to you before you start the plan. We have no extra charges. Our set-up fee covers the following:
• Drafting of your payment plan
• Liaising with your creditors
• Calculating and proposing your reduced payments
• Preparation of your personalized financial statement
Due to the first two payments being used as our setup fee to cover administration costs we would advise clients that a token payment is made to the creditors until your third payment is sent out by Debt Stop Direct.
How much will an IVA cost me
An IVA attracts professional fees chargeable by the Insolvency Practitioner for the work carried out on your case. These costs form part of the IVA arrangement and are built into your payments.
An IVA involves costs chargeable by the Insolvency Practitioner and these are detailed in your IVA proposal. The Practitioner has the role of Nominee when he is initially proposing your Arrangement and the Nominee fee is usually the equivalent of the first 4 to 5 payments made into the Arrangement, dependant on creditor voting. He can take these payments each month for the work done in preparing your case and holding the meeting of creditors.
Once approved by the creditors, the Practitioner’s role is then changed to Supervisor which basically means he oversees the management of the Arrangement, reports to creditors and carries out income and expenditure reviews. He is permitted to charge a fee for his work as Supervisor which usually equates to 15% of any future payments into the Arrangement. This is an example of how the IVA fees work but it can differ from case to case, therefore when signing an IVA proposal you will see listed in detail the specific fees proposed on each individual case.
If you complete your IVA as agreed then you will pay no more than your scheduled monthly installments. However, if your IVA fails before completion then any outstanding fees to your Insolvency Practitioner will be taken from the amounts you have already paid and will not go towards reducing your debt.
How would a change in circumstances effect an IVA
If your circumstances change for the better through inheritance, lottery win etc then you may be required to pay back the full amount owed before the IVA proceeded.
How would an IVA effect my credit rating
IVA’s have a significant effect on a credit record. Even when you have completed on your IVA you may also need to declare this fact on mortgage/credit applications for many years after an IVA was completed even if it is no longer visible on a credit record. Like all debt solutions there are significant advantages and disadvantages that go along with using an IVA to resolve debt concern and it is important for you to be aware of same. Your credit file can be effected for up to 6 years after the IVA has completed.
IVA cooling off period
You can withdraw from proposing an IVA at any time prior to you signing your IVA proposal, without charge. Once the proposal has been signed and returned to us, we reserve the right to charge an administration fee for the work we have carried out on your behalf, which will usually be equivalent to one monthly payment.
Pros of Debt Management
Cons of Debt Management
Pros of IVA's
Cons of IVA's
The pros of a Trust Deed
The Cons of a Trust Deed
IN DEBT? DEALING WITH YOUR CREDITORS
For more information on the Pro’s and Cons of each debt solution available please click this link
Listed Below are the most frequently asked questions concerning Debt management and IVA's.
If there isn't an answer to a question you have, please feel free to contact us.
Pre-Contract Information Guide to Debt Management & IVA's
How to contact us
It is easy to talk to a member of staff at Debt Stop Direct. Contained within the pack will be your personal debt management advisors details. This will include their full name, telephone number and email address. They will be happy to answer any queries you may have or explain any aspect of the plan you aren’t sure of. Alternatively you can simply call free phone 0800 634 3058.
What if circumstances change
A debt management plan is an informal arrangement, meaning any change of circumstance can easily be accommodated. At any point we can change the arrangements if a more suitable solution is available.
What happens to funds held if you cancel
If this happens within the initial cooling off period we will refund any money we are currently holding. If you cancel after this period we will refund any money we haven’t distributed to creditors minus our fees for working on your account. We will not charge any penalty fees or charges.
Will Creditors always accept reduced payment offers
Nothing can be guaranteed on a debt management plan as creditors are not currently legally obliged to accept any offer we put forward. However we do have vast experience in the negotiation process and also find our relationship with the various creditors means we can boast a success rate of agreeing a reduced monthly payment in over 90% of cases we take on. You can rely on our experience and creditor relationships to provide the best possible service for you.
Will creditors continue to pursue me for payment
Again there is nothing a debt management company can currently legally do to stop creditors contacting you regards your debts. However once we have an agreement in place you will find that communications between yourself and your creditors largely stop. Once we inform a creditor we are dealing on your behalf we request that communications are directed through ourselves, this takes the pressure off of you and allows us to deal directly with them. Any communications we have with them will be reported back to you on a regular basis. If creditors do keep chasing you directly we provide prepaid envelopes so that you can send any correspondence to us and we also provide the details of your client liaison manager for you to pass on to them. If you receive any unwanted contact please keep us informed and we will always endeavour to ensure this is minimised on your behalf.
We would advise that anyone still banking with a creditor being dealt with on the DMP to change bank accounts, so to avoid the creditor withdrawing funds from your account, if you have any questions about this please feel free to call us.
Is a credit check required
As we are not lending you any money, we are not required to check your credit file.
Will my Credit Rating be affected by the plan
Unfortunately in the short to medium term your credit rating can be adversely affected. This is because by joining the plan you are breaking the contractual repayments on your unsecured debts. However you may already have a poor credit rating if you have arrears or a history of missed or late payments. Indeed should you continue to struggle and potentially miss payments through a lack of affordability the effect on your credit file could be equally severe if not worse, than the effect imposed by joining the plan. Your credit file can be effected for up to 6 years after the completion of the Debt Management plan.For more information about the affect on your credit file please click this link
Will joining the plan prevent creditors taking further action
As a company no guarantees can be made that further action will not be taken. This may include court action to recover outstanding debts. However if this does happen we will immediately respond on your behalf to help make repayments affordable for you.
Can I take out a plan if I am a homeowner or tenant
It makes no difference at all whether you are a homeowner, tenant or even living with parents. You can take out a debt management plan under any circumstances.
Do I need to be in Full Time Employment
In respect to employment all we require is that you have additional income above your basic living costs.
Is this a loan
We are not money lenders and we won’t pay off your debts. Our plan allows you to repay your creditors at a rate that is affordable to you. If you fail to keep up plan repayments we can’t make payments to your creditors.
Will I receive a Default Notice
By starting a debt management plan you will be in default on your original credit agreement therefore allowing your creditor to issue a Default Notice. Different creditors react differently to this situation and therefore no guarantees can be made as to whether a default notice will or wont be issued.
Will CCJ's affect being on a plan
This will have no effect at all. You can even use the plan to make payments against any CCJ's that currently exist against you. All we ask is you are honest from the beginning and make us aware of any judgments against you.
Will other family members find out about my debts
Although we feel it is best to be open with partners, legally we only need them to know if the debts are shared or you need to take into account your partners income to support the plan.
What is the difference between Secured and Unsecured Loans
Simply put a secured loan is secured against assets that you own. (e.g. car or property) An unsecured loan is not secured on your assets (e.g. personal loan, credit card).
Will the payment plan cover all my debts
Unfortunately a debt management plan can only cover unsecured debts and arrears.
It is important that you give priority to other debts that will have more serious consequences if regular payments are not maintained. This type of payment must be made directly from you. Examples include rent or mortgage, loans secured against the property, utility bills and HP agreements.
When we start assessing your finances we will take into account these priority debts and an allowance for day to day living. From this assessment we can calculate what you can realistically afford to pay each month.
How is my money collected and distributed to my creditors
You can make payments to us in any of the following ways:
• Card Payments
• Cash
• Postal Order
• Bank Transfer
• Giro
• Standing Order
• Cheque
Once the payment reaches our account we will distribute your monthly payments to your creditors for you, along with deducting our monthly management fee. If we are unable to collect your payment we will not be able to pay your creditors.
How long will it take before I am debt free
This obviously depends on individual circumstances, but because you are making reduced payments to creditors the time period will be extended. By repaying the debt over a longer period you may have to pay an increased total amount. During the initial consultation this will be explained to you along with an estimate of how long the plan will need to run for. What we must stress is that a debt management plan is not an overnight solution and will require commitment from you to keep up the lower repayments. We would also stress although we do review your finances on a regular basis if you find your affordability changing, either through increased or decreased affordability let us know, as by altering your payment amount, you will also see a change in the estimated plan duration.
Debt management cooling off period
You have a cancellation right which is sent out in the written information sent to you. You are also entitled to a 'cooling off' period, which ends seven working days after you receive your contract documents. If you change your mind during this cooling off period any monies paid will be returned to you with no charge being made
How much will debt management cost me
We charge an initial fee equivalent to the first two months payments. This is used as our set-up fee and covers our administration costs. If you continue to make your payments and see the plan through to completion, a sum equal to the first two months payments will be used as the final installment as a gesture of goodwill from ourselves. This may result in a delay of up to two months before your creditors receive payment. However it can take four to six weeks to put in place agreements with your creditors. This may cause your account to move into arrears or further into arrears. Each month we will take a monthly management fee for working on your account. This is 17.5% of your monthly payment but subject to a minimum fee of £30.00 per month. All costs will be notified to you before you start the plan. We have no extra charges. Our set-up fee covers the following:
• Drafting of your payment plan
• Liaising with your creditors
• Calculating and proposing your reduced payments
• Preparation of your personalized financial statement
Due to the first two payments being used as our setup fee to cover administration costs we would advise clients that a token payment is made to the creditors until your third payment is sent out by Debt Stop Direct.
How much will an IVA cost me
An IVA attracts professional fees chargeable by the Insolvency Practitioner for the work carried out on your case. These costs form part of the IVA arrangement and are built into your payments.
An IVA involves costs chargeable by the Insolvency Practitioner and these are detailed in your IVA proposal. The Practitioner has the role of Nominee when he is initially proposing your Arrangement and the Nominee fee is usually the equivalent of the first 4 to 5 payments made into the Arrangement, dependant on creditor voting. He can take these payments each month for the work done in preparing your case and holding the meeting of creditors.
Once approved by the creditors, the Practitioner’s role is then changed to Supervisor which basically means he oversees the management of the Arrangement, reports to creditors and carries out income and expenditure reviews. He is permitted to charge a fee for his work as Supervisor which usually equates to 15% of any future payments into the Arrangement. This is an example of how the IVA fees work but it can differ from case to case, therefore when signing an IVA proposal you will see listed in detail the specific fees proposed on each individual case.
If you complete your IVA as agreed then you will pay no more than your scheduled monthly installments. However, if your IVA fails before completion then any outstanding fees to your Insolvency Practitioner will be taken from the amounts you have already paid and will not go towards reducing your debt.
How would a change in circumstances effect an IVA
If your circumstances change for the better through inheritance, lottery win etc then you may be required to pay back the full amount owed before the IVA proceeded.
How would an IVA effect my credit rating
IVA’s have a significant effect on a credit record. Even when you have completed on your IVA you may also need to declare this fact on mortgage/credit applications for many years after an IVA was completed even if it is no longer visible on a credit record. Like all debt solutions there are significant advantages and disadvantages that go along with using an IVA to resolve debt concern and it is important for you to be aware of same. Your credit file can be effected for up to 6 years after the IVA has completed.
IVA cooling off period
You can withdraw from proposing an IVA at any time prior to you signing your IVA proposal, without charge. Once the proposal has been signed and returned to us, we reserve the right to charge an administration fee for the work we have carried out on your behalf, which will usually be equivalent to one monthly payment.
Pros of Debt Management
- Consolidate your debts into one affordable monthly payment
- We aim to freeze or reduce interest and charges
- We will deal directly with your creditors on your behalf
- Regain control of your finances
- Confidential help & debt advice
- Fair and open way of sharing payments, widely understood by creditors.
- We will help you prepare your plan, including agreeing the level of your household and personal spending based on guidelines, which can then be used to put your case to the creditors
- You may be able to vary your payments if your circumstances change.
- You make single payments each month to Debt Stop Direct and we will be responsible for administering all payments to your creditors.
- Creditors may be prepared to write off the balance of what you owe after a period of time if: you have shown that you have made every effort to repay them as much as you can; and you have maintained regular payments to the debt management company.
Cons of Debt Management
- You remain liable to pay your debts until they are paid in full.
- You may not be able to make reduced offers if your circumstances worsen and you can no longer afford your agreed monthly payments.
- We can’t force creditors to accept your proposal or freeze interest. A plan is not binding on creditors who refuse to take part in it, but they can’t refuse to accept any payments made to them we will however use our vast experience to work towards agreements
- Creditors could still take enforcement action against you
- Creditors could still take enforcement action against you, for example by getting a county court judgment
- A plan can last for several years. However, some creditors may be prepared to freeze interest for only a shorter time. If interest and charges cannot be frozen for the full length of the plan, then the total amount you end up paying under the plan could be more than the original amount of your debts, and could extend the lifetime of the plan.
Pros of IVA's
- One single monthly affordable payment usually over a period of 60 months
- Creditors will no longer contact you by letter and/or telephone regarding payment of your debt
- Monthly repayments are set at an affordable amount prior to the IVA starting
- Legal protection from any creditor proceedings
- Avoid Bankruptcy
- Overseen by a regulated and licensed professional Insolvency Practitioner
Cons of IVA's
- The insolvency practitioner may require payment in advance for preparing your proposal and getting your creditors’ agreement.
- Your IVA is entered on a public register
- If there is some equity (value) in your home after taking account of the mortgage(s) on it, you will probably have to pay for your share, usually in the fifth year of your IVA, by re mortgaging the property. If you can’t get a re mortgage, you may have to continue making monthly or quarterly payments from your income, for up to another year
- If your circumstances change, and your practitioner can’t get creditors to accept amended terms, the IVA is likely to fail. You will then still owe your creditors the full amount of what you owed them at the start, less whatever has been paid to them under your IVA.
- If your IVA fails, you may be made bankrupt
The pros of a Trust Deed
- One affordable payment per month
- Debt free in 3 years (in most cases)
- Stay in your home and keep your car
- Protect yourself against legal action
- Creditors will no longer contact you by letter and/or telephone regarding payment of your debt
- Avoid sequestration (Bankruptcy)
The Cons of a Trust Deed
- You cannot take out further credit until your Trust Deed is complete
- If you earn more on a regular basis you may be asked to pay extra
- You may be asked to re mortgage to release equity in your property
- If you have an expensive vehicle, you may be asked to down grade to a cheaper model and pay any monies left over into your Trust Deed
IN DEBT? DEALING WITH YOUR CREDITORS
For more information on the Pro’s and Cons of each debt solution available please click this link
