How do I set up a EuroDebt DMP?
The long-term goal of a EuroDebt Debt Management Plan is to help you become debt free or to resume contractual payments with your creditors. To achieve this we work out with you all your income and all your outgoings so that we can calculate what you can reasonably afford to pay to your creditors to pay off your debts. This is done at the Home Visit.
The Home Visit - Client Financial Planner
During the Home Visit, which normally takes around 1½ to 2 hours, the EuroDebt Advisor will complete a Client Financial Planner with you that accurately reflects your income and expenditure. This includes assessing any debt or arrears with your priority creditors like rent, mortgage, utility bills and council tax.
You will be asked to provide proof of income and evidence of expenditure items listed, including bank statements and creditor statements.
The EuroDebt Regional Advisor will also try to identify whether there is additional income that you or your family are entitled to that isn't currently being claimed. They will also look at cost saving opportunities, including whether you have previously switched energy providers.
Your Single Payment Plan
Our DMP is called a Single Payment Plan (SPP). As the name suggests, the Single Payment Plan is one single affordable monthly payment which you make to EuroDebt. Your payment is held in a Client Account and cannot be used for other business purposes by EuroDebt.
We calculate how much the SPP should be after the Home Visit and after we have received up-to-date balances from your creditors. We calculate the SPP by establishing what you can really afford to pay. The amount you pay is then allocated to each of your unsecured creditors - the amount each creditor receives is based upon the total amount owed to each of them - this is called a "pro rata" payment with a minimum payment of £2 to each creditor per month. In addition, your SPP payment includes our monthly management fee.
We make the payments to your creditors on your behalf on an agreed date after receiving your SPP payment.
Illustration of an EuroDebt Debt Management Plan (DMP)
Employed couple who are homeowners in their late thirties with equity exceeding total unsecured debts of £24,927 with 7 creditors and no savings. Current contractual payments equate to approximately 3% of the total debt balance, equating to £748, and they have started to miss contractual payments. Their mortgage and other priority payments are up-to-date.
They have several credit card debts and these would take over a decade to be cleared at minimum contractual payment [assuming no further usage] with an UK average APR of over 18%.
Using the Common Financial Statement (CFS), the couple's disposable income (DI) is estimated to be £294, where monthly repayments would be reduced by £454 to a level they can afford.
Fees are applicable for setting up and managing the DMP, which are VAT exempt.
A set-up fee of £1,176 would be payable in this instance and this can be collected over three months, with EuroDebt making holding payments to qualifying creditors in the first, second and third month. The monthly management fee would be £51.45 (i.e. 17.5% of £294) once payments are disbursed to your creditors through the EuroDebt DMP.
The EuroDebt DMP duration is based upon interest & charges being frozen by the creditors and the true opening debt balance being cleared over the lifetime of the DMP. The DMP would be reviewed at least annually.
Estimated DMP duration = total debt divided by (DI minus monthly management fee) + the period to pay the set-up fee, typically three months. EuroDebt charge a maximum of 144 monthly management fees. So in this illustration:
Estimated DMP duration is calculated as 106 months = 8 years and 10 months to be debt free. Defaulted accounts on your credit record should be deleted 6 years after the default notice, meaning your record is clean at the end of the DMP.
Total estimated lifetime fees payable to EuroDebt = £1,176 + £5,299.35 = £6,475.33
EuroDebt is able to negotiate Full & Final settlements on some or all of the debts under management during the course of the DMP. This can significantly reduce the duration of the DMP and the level of debt repayable. Any changes in circumstances, positive or negative, will be taken into account with regard to the repayments offered to your creditors and the duration of your DMP.
Dealing with court actions
Nearly one in four of our clients have county court or baliff actions against them. We have an expert legal support team to deal with these for our clients. At your Home Visit, our Advisor will identify any such actions that might be against you so that we can prioritise them for urgent action by our legal support team once you instruct us to act on your behalf. Whilst our legal support team cannot represent you in court, we can approach the court on your behalf to try to get your payments reduced (e.g. if you have an existing court order). We can also seek to persuade your creditors to drop court action where this may be pending.
Setting up your Debt Management Agreement
If you would like us to help you manage your debts, the Advisor will complete a Debt Management Agreement (DMA) with you and explain the implications of the agreement at each stage.
You will also be asked to complete several other forms enabling us to act on your behalf. These include:
- Client Authority Forms to give permission for EuroDebt to contact your creditors on your behalf.
- A Visit Checklist to ensure that all the points have been properly covered by the Advisor during the Home Visit.
If this sounds relevant to your circumstances then contact EuroDebt today by freephone 0800 2 98 97 98 or APPLY NOW. There is no obligation on your part.
Important points to remember:
- Whilst lenders are not obliged to freeze interest and charges, in 92.9% of the current cases we have referred to them they have done so*. Where a lender does not freeze interest and charges the amount you owe and the period over which you repay that credit account may increase, though we will continue to request interest and charges be frozen once several payments have been made to your DMP.
- Whilst entering into a DMP can adversely affect your credit rating it is our experience that those who approach us already have an impaired credit record. By entering into a DMP you will be showing your creditors that you are taking a responsible attitude to resolving your financial problems and this could help you in the future.
* Figure accurate at the start of October 2012.