Debt Management Plan. Disadvantages?

AmandaDB

I have just applied to set up a DMP with the CCCS and I was wondering if anyone knew if there would be any disadvantages to doing this. It all seems to good to be true at present!! Many thanks to all of you who take the time to help others here.

CLAPTON

without knowing any of the background it's difficult to say in your circumstances but some drawbacks might be

endless phone calls from creditors
although most eventually stop charges and interest many will continue to add these for some considerable time
your credit rating trashed for 6 years
unable to get any form of credit possibily except payday type loans
some jobs credit reference you
rentals often credit reference you
getting a mortgage may be very very difficult if not impossible


PS
if you have debts with your bank you need to open a new basic bank a/c immediately with an organisation with which you have no debts.

Tixy

Hi Amanda

Presumably CCCS have explained to you the effect on your credit rating? Your creditors will default you and that will make getting credit hard for the next 6years.
Potentially creditors could still take you to court although this is fairly rare on a DMP.
If you have a partner or anyone you are financially associated with it can also have an impact on their credit file - if you can disassociate yourself from anyone else (although if you have a joint mortgage that won't be possible).

You cannot take out any new credit whilst on a DMP (some people would say this is good rather than a drawback).
If you have a mortgage you will likely find it harder to switch providers or get a fixed mortgage (so could be stuck on a SVR with rising interest rates)

Although those are some drawbacks it really depends on what other options you have available to you - if you cannot meet your minimum payments currently then many of the drawbacks (like the wrecked credit file) will happen to you anyway. And at least if you use CCCS for a DMP then your creditors won't be hassling you personally and pressurising you into paying more than you can afford.

Tixy

CLAPTON wrote: »

endless phone calls from creditors

These can be easily stopped though by asking for all communication to be in writing.:)

AmandaDB

Thanks for the warnings Tixy and Clapton.
CCCS haven't actually explained anything yet as I've only just submitted the application!
Re opening a new bank account. Won't I have to clear my overdraft first?

CLAPTON

AmandaDB wrote: »

Thanks for the warnings Tixy and Clapton.
CCCS haven't actually explained anything yet as I've only just submitted the application!
Re opening a new bank account. Won't I have to clear my overdraft first?

well presumably you are going to default on your overdraft and just treat it as just another debt

dancingfairy

overdraft will just be added to the other debts and get a share off your payments like everyone else so no you won't need to pay it off first.
df