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Living on a debt solution

Faced with an unexpected bill on a Debt Management Plan?

Posted 08 September 2016

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Will you be able to cope with an unexpected bill if you start a DMP?

When you’re on a Debt Management Plan (DMP) you put your disposable income towards your debts - this is income that you have left over once all your essential bills have been paid. But what can you do if you’re on a DMP and you’re suddenly faced with a bill that you weren’t expecting?

In this situation, you might worry that you’ll struggle to keep up with your repayments. However, there are options that can help you deal with the unexpected expenses without jeopardising your DMP – these can help you stay in control of your finances even if your circumstances change. 

How do you pay an unexpected bill?

Whether you have a flat car tyre or your fridge packs in – life can sometimes throw something unexpected and costly our way. When you’re on a DMP allowances will be made for sundries - small, infrequent costs that crop up from time to time - and emergency expenses. Solution providers understand that life isn’t always predictable and so will make room for the unexpected in your budget. 

It’s really important that you don’t forget to put this money to one side or spend it on something else non-essential. If you take care of your sundry and emergency fund then it will take care of you should you ever need it. 

If you find yourself hit with a hefty bill out of the blue - don’t panic. The first thing you need to do is get in touch with your solution provider and explain what’s changed in your circumstances. Don’t forget that there’s ongoing support for you throughout the life of your plan, so keep them in the loop. They’ll be able to get in touch with your creditors, explain the situation to them and handle any negotiating if this is necessary. 

Can I take credit out to cover the bill?

When you’re on a Debt Management Plan (DMP) it’s not advised that you take further credit out. This is because you might find it difficult to pay this back and manage your DMP payments at the same time. Also, as your credit history will have been affected because you have not maintained your contractual payments, you may find that you’re only able to borrow at a high rate of interest, if you can borrow at all. 

Your creditors on the DMP may also be unhappy if you’re paying contractual payments to a new creditor, whilst only paying them a lower amount on the DMP. Added to this, it can be considered fraudulent to borrow money if you know you won’t be able to afford to pay it back. 

It will be better for you in the long run to use your emergency fund to cover the bill or to try and arrange a lower payment with your solution provider. 

Find my solution

Is it possible for my payments to change?

If it’s not possible to make further cutbacks to your budget, you might be able to have a payment break. This means that you don’t have to pay anything towards your debts for an agreed period of time. When your circumstances improve you start making your payments again. However, keep in mind, a break from your payments will extend your time on the plan, so it will take you longer to pay off your debts.  

If you miss payments on a DMP the agreement will break and it’s possible that your creditors may start adding interest and charges back onto your debts or they may look into taking legal action. Remember, because DMPs are an informal solution your creditors are not obliged to freeze interest or charges. This highlights the importance of keeping your DMP provider informed (or your creditors if you are managing your lower repayments yourself). It’s never a good idea to simply miss payments or pay less without any explanation. 

What other help is available?

In certain circumstances you may feel that you need some extra help. There are charitable grants available to support those people who meet their eligibility criteria. Turn2us is a charity that helps people struggling financially. There are over 3,000 charitable funds available that that can provide welfare and educational support. 

Turn2us has a free grants tool which lets you easily search for a grant that might be best suited to your circumstances. You can find out more information on grant-giving charities and their eligibility criteria, here

If you’re struggling to meet your repayments on your Debt Management Plan this is often a sign that something is wrong with your budget. Always let your provider know so they can review your budget with you and help to put the situation right. You can speak to our advisors to find out the best action to take - contact us here at Debt Advisory Centre by using the options to the left hand side of this page.

by Christine Walsh

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To find out more about managing your money and getting free debt advice, visit Money Advice Service, an independent service set up to help people manage their money.