Unlike some other debt management solutions, a debt management plan isn’t legally binding. This means that if your plan isn’t working for you, you’re free to cancel. However, before you do so, it’s strongly recommended that you consult with your DMP adviser. The consequences of cancelling can be serious and it’s vital that you know what they are. Not only may you not receive a refund of your fees, but you’ll also need to ensure you have another way of dealing with your debts.
Why you might want to cancel a debt management plan
A DMP isn’t legally binding. Therefore, you’re within your right to cancel the plan if you want to. There are a few reasons why you may want to cancel, including:
- You’re unhappy with paying a fee every month. This means less money goes to your creditors to pay off your debts.
- Your debt interest hasn’t been frozen. Therefore, the problem is getting worse rather than better.
- Your situation has changed. You’re now struggling to make the monthly payments.
- You’ve had a windfall. If you’ve come into some money, for example, through an inheritance or a PPI claim, you may be able to repay your debts faster than if you stayed in the DMP.
- You’re unhappy with your DMP provider.
What to consider before you cancel a debt management plan
Since a DMP is an informal agreement, you’re entitled to cancel at any time. However, before you do, you need to think very carefully about what will happen next and how you will pay your debts. Here are a few things to consider before you cancel your debt management plan.
- How you will deal with your debts now. Exiting a DMP may be the right move for many reasons, but you shouldn’t do so without a plan for dealing with your debts afterwards. When you cancel your DMP, your creditors will be informed, and they may begin charging you interest and late payment fees right away. They may also expect you to start paying higher payments again. You’ll also need to think about how you’ll cope with dealing with your creditors yourself. Before cancelling, consider other debt management solutions that will help you to manage your debts.
- If you’ll get a refund of your fees. This depends on the agreement you have with your DMP provider. In some cases, you may be able to receive a refund of some of your fees. If you arranged your DMP online or over the phone within the last 30 days, you have extra rights. Since it’s a distance sale that wasn’t carried out face to face with the provider, you’ll benefit from a cooling–off period. During this time, you’re free to cancel your DMP and receive a refund of the fees you’ve paid. Cancellation can be for any reason at all.
- If you’ll be charged a cancellation fee. Your DMP provider should have informed you about cancellation fees when started your plan. These fees are usually reasonable.
- If you were misled when starting a debt management plan. DMP providers that are FCA authorised are required to adhere to certain rules. These include not misleading you. If you think they misled you, perhaps by not providing you with important information, you should consider making a complaint when you cancel your plan.
Debt management plans are one of the most popular solutions for people struggling with debt in the UK. Although they can give you greater control over your finances and allow you to repay your debt in an affordable way, they’re not right for everyone. You’re well within your rights to cancel your DMP at any time. Contact Debt Assist UK for further advice.