Can Interest and Charges Be Frozen in a Debt Management Plan?

March 12, 2018

In Northern Ireland a Debt Management Plan (DMP) can be used to help you to manage your problem debts. Here at Northern Ireland Debt Solutions, we can negotiate with your creditors to allow you to make one single affordable monthly payment to us, which we will then distribute between your creditors. At the end of your DMP your total debt will have been paid off.

One of the main reasons that many people feel that their debt is becoming unmanageable can be due to the increasing interest and late payment charges that many lenders add on to your debt if you fall behind with your payments. However during a DMP we may be able to negotiate with your creditors to persuade them to freeze any interest and charges, thus allowing you to clear your debt more easily.

Are Creditors Obliged to Freeze Interest and Charges During a Debt Management Plan?

As a DMP in Northern Ireland is an informal arrangement, your creditors are not obliged to freeze any interest and charges that they are able to levy on your debt. However, most lenders will have signed up to either the Standards of Lending Practice or the Credit Services Association Code of Practice. These are not pieces of official legislation, but adherence to these guidelines is considered best practice amongst the lending industry.

In general most lenders in Northern Ireland will consider freezing interest and suspending charges if you can prove to them that you are having financial difficulties. For example in the Standards of Lending Practice it states that:

‘Firms should consider freezing or reducing interest and charges when a customer is in financial difficulty.’

However it is important to remember that when they agree to your repayments as part of a DMP, they are not legally obliged to suspend adding any interest and charges to your account and so may continue to do so.

Can I Improve My Chances Of Getting Any Interest and Charges Frozen in a Debt Management Plan?

Lenders are much more likely to consider freezing any interest and charges that could be added onto your debt whilst you are paying into a DMP if you can demonstrate that you are taking your debt seriously. Working with your debt management company you should draw up a realistic budget that shows that you are paying the maximum amount that you can afford to pay into your DMP. Also ensure that you keep up your monthly payments, as failure to do so may result in in your creditors refusing to accept the terms of your DMP.

Sometimes you may also find that an accredited debt management company will have a better chance of negotiating with your creditors to freeze any interest and charges than if you try and negotiate directly with your creditors yourself.

You may also simply have to be patient. Many creditors will not freeze any interest or charges until between 3 and 6 months into your DMP, once you have fallen far enough into arrears for them to accept that you are in difficulties, but have made enough regular payments to prove that you are trying to pay them back.

What Can You Do If Your Creditors Refuse To Freeze Interest and Charges?

Legally there is nothing you can do if a creditor refuses to suspend the interest and charges on your debt when you are paying into a Debt Management Plan in Northern Ireland. If this is the case and you are still struggling to clear your problem debts then it may be that a different, more formal, debt solution would actually be more suitable for you.

An Individual Voluntary Arrangement (IVA) is a formal debt solution, which runs along similar lines to a DMP, but in which your creditors are legally required to freeze any interest and charges. By entering in an IVA you will again make a single monthly payment, but this will be for a fixed period of either 5 or 6 years, after which any remaining debt will be written off. However as an IVA is a formal arrangement then it will stay on your credit record for up to 6 years and could affect your chances of getting credit in the future.

Northern Ireland Debt Solutions are specialists in helping residents of Northern Ireland deal with their problem debts. Contact us today either online or on 0800 470 0461 where we can either provide you with confidential advice over the phone or arrange a free same day meeting at our Belfast office. We promise to take the time to get to know you and your situation before recommending the best course of action to help you to take control of your finances and ease creditor pressure.

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