Missed a Debt Management Plan Payment?

How a plan works if you miss a payment

A debt management plan is an informal agreement. You pay a set amount to your provider each month, and it distributes the money to your creditors. Creditors are asked to freeze interest and charges, but they are not legally obliged to do so, and they are not legally bound by the plan. See debt management plans. If you miss a payment, your creditors do not receive their share, and they may react in different ways.

What can happen

• Interest and charges may resume: Creditors who had frozen them may reinstate them.
• Creditors may chase you: You may receive letters or calls.
• Your plan may be reviewed: The provider may ask about your circumstances.
• Court action is possible: Because the plan is informal, a creditor can still take legal action, although this is less likely if you are engaging and paying what you can.
• Your credit file may show missed payments: This adds to the existing record.

What to do straight away

1. Contact your provider. Explain what happened and how long you expect it to last.
2. Review your budget. Use how to make a debt budget to check your income and essential spending.
3. Ask about options. These could include a payment break, a reduced payment for a period or a revised plan.
4. Keep paying priority debts. Rent or mortgage, council tax and energy come first. See priority and non-priority debts.
5. Get it in writing. Ask the provider to confirm any change.

Payment breaks and reduced payments

Many providers can arrange a short payment break if you have a temporary problem, such as sickness or a change of job. They may ask for evidence. A longer-term fall in income calls for a new budget and a revised payment. The provider contacts creditors to explain the change, but creditors have the final say on whether to continue to freeze interest. If you cannot afford even a reduced payment, a formal solution may be better. See IVA vs DMP vs DRO vs bankruptcy.

If your income has dropped

Check whether you are claiming everything you are entitled to, such as Universal Credit, Council Tax Reduction and help with housing costs. A benefits check can find money you did not know about. See debt help after redundancy if you have lost your job. Also review bills using how to cut household bills.

If your provider charges a fee

Some providers charge fees that come out of your payments. If you are struggling, those fees reduce what creditors receive, which can make the plan harder to sustain. Ask the provider exactly what you are paying and compare with free options. See debt management company fees.

Options if the plan is no longer workable

If your circumstances have changed so much that the plan is not realistic, discuss alternatives with a free adviser.

• A revised plan with lower payments
• Breathing Space for a short pause in enforcement, if you are eligible. See Breathing Space
• A Debt Relief Order if your income, assets and debts are low enough
• An IVA or bankruptcy if you have different circumstances

Avoiding repeat problems

Try to build a small buffer in your budget for the unexpected, even if it is a few pounds each month. Review your plan regularly and tell the provider about any change in income or costs, positive or negative. Set up your payment by direct debitDirect debitA Direct Debit is an instruction to your bank to let a company collect varying amounts from your account on agreed dates.Read more → on a date that follows payday, and keep a note of the date. If you have a charity-run plan, see StepChange explained for how that service works.

A worked example

Chris pays £180 a month into a debt management plan. One month his car breaks down and he cannot afford the payment. He phones his provider the same day. They ask for a short explanation and agree to a one-month break, which they pass on to his creditors. Two of the creditors accept it without comment. A third sends a letter, but Chris responds with a copy of the agreement, and nothing more happens. He restarts the following month. Had he stayed silent, that creditor might have restarted interest and sent reminders. A phone call was all it took.

Keeping a record

Keep copies of your plan, statements, emails and letters. Note the date and name of anyone you speak to. If a creditor says they have not agreed to the plan, you have the evidence. Good records help your provider and any adviser who looks at your case later.