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Should I do a DMP?

You do not need to be insolvent to enter into a Debt Management Plan. If you are insolvent you should be considering solutions such as bankruptcy or an individual voluntary arrangement (IVA). Having said that, let’s have a look at some key aspects of Debt Management.

What is the Attitude of Creditors to a Debt Management Plan?

The truth is that creditors would really prefer that you honour the terms of your original contracts and make repayments on their credit cards, loans or other borrowings in full and on time. However, if you are unable to do this, creditors typically want to maximize the amount that you will repay and minimize the length of time it takes you to complete your repayments.

Debt Management Plan Budget

A Debt Management Plan is a plan to repay all of the debt but at a slower rate and over a longer period of time than originally contracted. Since Debt Management promises full repayment of the debt, creditors prefer you adopt that approach rather than if you were to go bankrupt – in which case they might only recover a small amount of the debt from you. If you were to enter an IVA instead creditors would expect to recover less than half of your debt but it is still better than bankruptcy for the creditors.

Can you enter a Debt Management Plan if you are Solvent?

Yes, you can. Debt Management is really an informal process with no comprehensive legislation governing the process. Although your income and assets may be sufficient to pay off your debts in full in accordance with the terms of your contracts with your creditors you might be unwilling to carry out some of the necessary actions to achieve this. You might, for example, be unwilling to sell your home. By entering a Debt Management Plan you might be able to manage your finances in a more orderly way and sell or re-mortgage your property at a time that suits you or when the market is more favourable or when re-mortgage terms are more reasonable.

Can you prevent your neighbours from learning about your Debt Management Plan?

While there are no guarantees that your Debt Management Plan can be kept from the attention of your neighbours, a few practicable steps will minimize the likelihood of them finding out. Assuming that none of your neighbours is a creditor of yours, then provided you behave discreetly in your communications with your creditors and with the debt management service provider you choose to use, then you can have a reasonable level of confidence that your neighbours will not be aware of your Debt Management Plan. Commercial debt management service providers as well as CCCS, CAB and Payplan all offer complete confidentiality and privacy in their dealings with you and no information should be disclosed by them to any third parties such as your neighbours or your employer. Only your creditors will be contacted and you will have to agree in advance before even that can happen. The norm is to give your DMP service provider written authorization to contact your creditors and to negotiate with them on your behalf.

Can you combine Debt Management and an IVA?

Not at the same time or by the same person. You could enter Debt Management for a period of time and subsequently enter an IVA. Why would you do this? One reason is that your current circumstances lack the stability needed for an IVA at present but that after a limited period sufficient stability might be established. For example, you might be undergoing divorce proceedings and there might be a lack of clarity relating to future income or in relation as to how the marital assets are to be divided. It might make sense for you in such circumstances to enter a Debt Management Plan until your divorce and its settlement terms are finalized and then to enter into an IVA if the divorce should result in your insolvency. Similarly, you might be made redundant and decide to become self-employed as for example a taxi driver. Creditors would be likely to reject proposals for an IVA before you established some self employed trading history and thus a short duration Debt Management might be the best course for you.

Can you Enter Debt Management in Ireland? 

The only practical solution available to distressed debtors who find themselves personally insolvent in Ireland is to enter a Debt Management Plan with their creditors. While bankruptcy is theoretically available as an option, the cost of the process and the draconian sanctions attached to it make it an impracticable route for personal insolvency. Only a handful of bankruptcies occur each year in Ireland. There is no equivalent process to the IVA in the UK available to Irish citizens. The government funded Money Advice and Budgeting Service (MABS) offers advice to debtors. However, that organization does not have the resources to manage debt management plans to the extent that the commercial Debt Management Plan providers can offer. The Irish Government has been for some time now been considering introducing legislation in line with the recommendations made by the Law Reform Commission last year. Should such legislation be enacted, it is likely to include an IVA type solution as well as a controlled DMP type solution. There are no plans to reform the Irish bankruptcy laws at present and it is unlikely to happen for many years, given the complexity of the necessary legislation and the current crisis in Irish government finances.

 Advice

Before opting for a Debt Management Plan you should consider the pros and cons of other possible solutions such as an IVA or bankruptcy and seek professional advice from one (or more) of the many firms offering insolvency services. They use the services of specialists called Insolvency Practitioners who will provide you with free advice outlining all your options. You should also consider contacting CAB or the CCCS and you may even have to take independent legal advice.

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Fees and key info

We are happy to provide you with debt advice only. We only charge a fee if you opt for one of our debt solutions. Fees will depend on which debt solution we provide and what your personal circumstances are. All fees will be discussed prior to commencement of any service or debt repayment plan. Click here to read our fees and key info. Please note: From time to time we may refer you to other services providers or charities such as the CAB.

MoneyHelper

If you’d like more information on other sources of free debt help and advice you can visit MoneyHelper – an organisation, backed by government and set up to offer free and impartial advice to those in debt. - Click here to visit MoneyHelper