How do DMPs usually fail?
There are many reasons why a person may struggle to keep their DMP going.
These include:
1. Incorrect budget:
Your DMP payment needs to be reviewed if:
- Your expenses have changed or
- Something is missing from your budget
Regular living costs increase over time. Things like:
- Food
- Household bills
- Travel
Your DMP is harder to manage if prices increase and you start cutting back on essentials.
It is important to add these changing costs to your budget.
This is why you should do a yearly review with your DMP provider.
2. A budget that is hard to stick to:
You need to be happy with the budget you build with your DMP provider.
- This budget is the basis of your DMP plan
- The budget should work with your needs
- It is important to stick to the spending it outlines
Your DMP will be hard to pay if you ignore your budget or overspend.
3. A budget without enough for essentials:
Many clients want to give things up so there is more money for their DMP.
It is easy to think you can spend less on:
- Food
- Clothing
- Toiletries
- Travel
But it is important to be realistic.
Reducing spending is useful, but the people you owe do not expect you to stop buying things you need.
Review your budget if you need more money for essentials.
4. Leaving a debt out of your budget:
You must include all of your unsecured debts in your budget.
- Creditors not included will expect payments
- It is harder to pay debts that are not in your budget
Including all your debts means:
- The people you owe have a better picture of your situation
- They are more likely to support your DMP
- You only have to make one monthly payment
Access your credit file to:
- See all your debts
- Make sure they are included
You can do this online, for free through the one of the three credit reference agencies in the UK.
Tell your DMP provider if you are missing a debt.
Note - The debt might be ‘statute barred’ if you have not paid in over six years.
This means the people you owe cannot force you to pay it.
5. Missing several DMP payments:
You may be unable to make your monthly DMP payment if you have an emergency cost like:
- A broken boiler or
- Car repairs
StepChange does not cancel plans for one missed payment, especially when circ*mstances are outside your control, but other providers may.
However, we may have to cancel a DMP if there are multiple missed payments.
Are you a StepChange client? Log in to OnlineDMP to manage and update your plan.
6. Failing to review your budget on time:
We review your DMP to make sure it is still the best solution for you.
The Financial Conduct Authority (FCA) says this should be at least once a year.
We will let you know when your review is coming up by sending you a:
- Letter
- Email, or
- Text
We may have to close your DMP if we do not hear from you. This is a last resort.
7. Taking out credit during your DMP:
Using credit during your DMP is against the terms of our plan. This can result in it being closed.
It can also mean your budget is not right.
- You budget is supposed to cover all your costs
- This is so you do not need more credit
If a creditor rejects my DMP, does that mean it is failing?
The people you owe will usually take what you can afford to pay them through a DMP.
But they may not accept it if they don't think it works in the long term.
- This does not mean that your plan is failing
- Keep making payments
- They are still applied to your balance
Get in touch with your DMP provider if the people you owe refuse your payment.
You will get a letter telling you if the debt goes to a collection agency.
Let your DMP provider know to make sure your payment goes to the right company.
I want to make sure my DMP succeeds. What should I do?
The best way to help your DMP succeed is to:
- Regularly review your budget
- Stick to your budget
- Look for ways to reduce your spending
- Look to save money on bills
- Have enough money each month to cover your needs
- Tell us about every debt you owe
