Debt Management

What are Debt Management Companies (DMCs)?

DMCs are licenced professional organisations providing practical advice and support to those experiencing financial difficulty. DMCs deal with your creditors, acting on your behalf for as long as you require assistance. They compile an income and expenditure statement to formulate a debt management plan.

What is a Debt Management Plan (DMP)?

A DMP is an informal arrangement whereby a licenced Debt Management Company (DMC) intervenes to renegotiate the terms agreed in respect of your unsecured debts (e.g. credit cards and personal loans).

You pay just one simple, regular, monthly payment that you can reasonably afford, and the DMC then handles your creditors for you. In the majority of cases Gemstone successfully renegotiate payment terms which usually leads to concessions such as stopped interest and charges.

Does Debt Management affect my credit rating?

If you are eligible for a debt management plan, it is likely that you have already missed payments to your creditors or are about to. When you miss payments to your creditors, they are likely to inform the Credit Reference Agencies (CRAs) of this fact - this can adversely affect your credit rating. The payments made under a debt management plan will show on your credit record for up to six years. The fact you are making regular payments can go some way to repairing the damage of previously missed payments. This could possibly help you to obtain credit more readily in the future.

How does a Debt Management Plan work?

Your Debt Management Plan ensures your essential living expenses such as mortgage / rent, utility bills, council tax, food etc. are covered. Any remaining money is managed under the plan to repay your unsecured debts at a rate you can reasonably afford.

How long does a Debt Management Plan last?

This will depend on the amount you owe and are able to pay into the plan. Unlike loans, your payments are linked directly to your ability to pay.

If your situation gets worse then it can take longer to complete, as less is being repaid toward your debts. Conversely, if your circumstances improve and you start paying more towards your plan, the duration of the plan will shorten. You can make lump sum payments to shorten your plan, should you receive an annual bonus or an inheritance, for example.

The duration will also be affected by your DMC's success in gaining concessions from your creditors, such as interest suspension or a reduction in the fees applied to your debts.

Do creditors have to agree to concessions?

Your creditors do not have to agree to freeze interest or charges under a Debt Management plan, however Gemstone has a proven track record of gaining such concessions for the majority of our clients.

How much does it cost?

Our charges are in line with the majority of the industry with the first 2 months payments to ourselves being used to set up your account. From month three we charge a flat monthly fee of just £45 which is taken from your agreed monthly payment with the remainder being distributed to your creditors.

What are my Cancellation Rights?

Under The Consumer Protection (Distance Selling) Regulations 2000 you are entitled to a 'cooling off' period, which ends seven working after you have committed to proceeding with your DMP. If you change your mind during this cooling off period, any monies paid will be returned to you with no charge being made.

IVA

What is an IVA?

An Individual Voluntary Arrangement (IVA) is a formal insolvency measure that allows you to pay your creditors at a rate you can afford. This is usually over a period of 5 (or in some cases 6) years, after which time all remaining debts are written off. During the time you are in your IVA, you will be restricted from taking out more credit and your living expenses will be restricted within industry-accepted guidelines.

How much does an IVA cost?

Your creditors will agree to pay your Insolvency Practitioner a fee for managing the IVA. If you complete your IVA as agreed, you will pay no more than your scheduled monthly instalments. If your IVA fails before completion, then any outstanding fees to your Insolvency Practitioner will be taken from the amounts you have already paid and will not go towards reducing your debt. It is important to bear in mind that if you receive any windfall during your IVA (such as an inheritance, lottery win or if the equity in your house rises sharply) you may be required to pay off your debts in full.

Do creditors have to agree to an IVA?

As long as at least 75% (by value) of your creditors agree to an IVA, it becomes legally binding for all creditors.

What happens if I stop paying my IVA?

Your Insolvency Practitioner will try and help you and may be able to modify your IVA; however, there is a risk of bankruptcy if you fail to make payments into your IVA.

Is it suitable if I own my home?

If you have equity in your home you may be required to remortgage your home in the fourth year of your IVA or release some of your equity for creditors.

Will an IVA affect my credit rating?

IVAs have a significant effect on your credit record. Even when you have completed your IVA you may need to declare this fact on mortgage and credit applications for many years after the IVA has completed, even if it is no longer visible on your credit record. Like all debt solutions there are significant advantages and disadvantages that go along with using an IVA to resolve your debt concerns and it is important for you to be aware of these. If you go ahead with an IVA, your Insolvency Practitioner should discuss these with you beforehand.

What are my Cancellation Rights?

You can cancel your proposed IVA without charge at any point before your proposal is sent to creditors. After this time you can still cancel but you may be charged an administration fee.

General

Do you charge for advice?

When you contact us, one of our trained advisers will go through your financial circumstances with you and recommend a suitable course of action. You are under no obligation whatsoever to go ahead with any service we may recommend to you and you can take our advice for free.

What is your Complaint Procedure?

A copy of our Complaint Procedure can be downloaded here.