Your questions answered
Here you will find the most frequently asked Debt Management Plan questions. If you can’t find the answer to your query here, please don’t hesitate to call us on 0800 096 1331.
Information videos
What is a debt Management Plan? 
Is a Debt Management Plan the most suitable option for my situation?
What are the advantages of a Debt Management Plan?
What are the disadvantages of a Debt Management Plan?
Contact us
How do I contact Baines & Ernst?
Cancellation
Will I incur any charges if I cancel my plan?
What happens to any money held for distribution if I cancel?
Credit and creditors
Do creditors always accept reduced payment offers?
What if my creditors continue to pursue me for payments?
Will I receive a Default Notice?
How will a plan affect my credit rating?
Will the plan prevent my creditors taking further recovery action?
General
Can I take out a plan if I already have CCJs against me?
Can I take out a plan if I am a homeowner or tenant?
Do I have to be in full time employment to get a Debt Management Plan?
Do I have to tell my partner?
Does the Payment Plan cover all of my debts?
Is this a loan?
What is the difference between a secured and unsecured debt?
Do I need to cancel my Direct Debits?
Do I need to change banks?
Will I be credit checked before acceptance?
Time and costs
How are the fees collected?
How is my money held until it is distributed to my creditors?
How long will the plan take?
How much does the Debt Management Plan service cost?
What are the full terms and conditions of the plan?
What if I am not happy with the service?
What if my circumstances change?
What other debt solutions may be available to me if my circumstances change?
Answers:
Will I incur any charges if I cancel my plan?
No, you can cancel with us at any time without any further charge.
Back to top
What happens to any money held for distribution if I cancel?
We will refund any monies you have paid that have not yet been distributed to your creditors at the time of cancelling.
Back to top
How do I contact Baines & Ernst?
It’s easy to talk to our Debt Solutions advice team, simply call on 0800 096 1331. Alternatively, complete the enquiry form to the right of the page and we’ll get back to you.
Back to top
Do creditors always accept reduced payment offers?
Creditors must treat you fairly; therefore when you make a reduced offer of payment, your creditors have to take your circumstances into account when deciding what to do. With experience spanning more than a decade and excellent relationships with over 3,500 UK creditors and financial institutions, you can rest assured that we will strive to negotiate the best repayment rate on your behalf.
Back to top
What if my creditors continue to pursue me for payments?
In the initial stages of the DMP process, you will probably continue to receive letters and phone calls from your creditors. This happens because it takes a short time to negotiate with your creditors and they will continue with their standard collection activities until a new repayment amount is agreed. This is normal and nothing to worry about.
As soon as we have received your signed Client Information Form, you can tell your creditors to contact us. We will then deal with all letters and phone calls from your creditors. Please note that we cannot guarantee that creditors will permanently cease to contact you – they are still entitled to do so. Do not ignore them, ask them to contact us.
Once your creditors know that we are dealing with your debts on your behalf, many of them will start communicating with us directly. Rest assured we will keep you informed about any correspondence we have with your creditors.
Back to top
Will I receive a Default Notice?
By coming on plan with us, you will be in default on your original credit agreement and your creditor is therefore entitled to send you a Default Notice. Creditors send out Default Notices to protect their own legal position.
Back to top
How will the plan affect my credit rating?
Because taking out a plan will result in you not making the contractual repayments on your unsecured debts, you should expect that your credit rating will be adversely affected in the medium to long term. However, your credit rating may have already been affected if you have missed or made late payments.
Back to top
Will the plan prevent my creditors taking further recovery action?
We cannot guarantee that your creditors will not take further action, including court action to recover debts from you. If they do take such action, please be assured that we will help you respond so that any repayment that is required is within your ability to repay.
Back to top
Can I take out a plan if I already have CCJs against me?
Yes. You can even use the plan to make payments against any existing CCJs that you have. Just make sure that we know exactly what your current situation is before commencing with a DMP.
Back to top
Can I take out a plan if I am a homeowner or tenant?
Yes. It makes no difference whether you are a tenant, homeowner or still living with your parents.
Back to top
Do I have to be in full time employment to get a Debt Management Plan?
No. To come on plan, you only need to have a surplus of income above what you need to live on. We will ask for proof of income.
Back to top
Do I have to tell my partner?
It is advisable that you tell your partner – especially if your partner’s income has to be taken into account to support the plan.
Back to top
Does the payment plan cover all of my debts?
No. A debt repayment plan can only cover your unsecured debts and arrears.
Priority must be given to other types of debts because of the serious consequences of not maintaining regular payments. You must continue to make these payments yourself. Some examples include rent or mortgage, hire purchase agreements, any loan secured against property, council tax and utilities such as gas, electricity and water.
When assessing your financial situation, we make suitable allowances for you to be able to afford your priority bills and day-to-day living costs before we calculate how much you can afford to pay towards your unsecured debts.
Back to top
Is this a loan?
No, a Debt Management Plan is not a loan. We neither lend you money, nor pay off your debts. Your payment plan is a solution that allows you to repay your creditors at a monthly rate you can afford. If you do not make payments into the plan, we cannot make payments to your creditors.
Back to top
What is the difference between a secured and unsecured debt?
A secured debt is a debt secured against a property or asset that you own. Typical secured debts will be a mortgage, hire purchase loans, council tax, etc. An unsecured loan is any loan not secured against a property or asset, such as a bank overdraft, a personal loan, a credit card, store card, etc.
Back to top
Do I need to cancel my Direct Debits?
As soon as we have advised you that your plan is in place, you should cancel all Standing Orders / Direct Debits to creditors on the plan, taking care to ensure that any payments to priority creditors such as mortgage, council tax, water rates, gas, electricity etc, are maintained or re-arranged.
Back to top
Do I need to change banks?
It is a strong possibility that if you are with a bank where you have credit facilities like an overdraft or loan, they may take steps to collect the money owed to them as soon as your salary or any other payment is paid into your account.
You should think about opening another account with no overdraft facility and with a bank you do not owe money to. This will give you more control over your money and will help to make sure that all your creditors get fair payments at a level that you can afford. Our advisors will give you any advice you may need on how to change bank accounts.
If you are worried that your credit rating may stop you from opening a new account, take a look at the Evolution Current Account from Secure Trust Bank.
The Evolution Current Account offers:
Guaranteed acceptance
No credit checks
No more overdraft charges
A simple application process
Safe and secure internet banking
Help managing your money
Back to top
Will I be credit checked before acceptance?
No. Since we do not lend you any money, we do not need to credit check you.
Back to top
How are the fees collected?
Once you have paid the initial set-up fee and your first month’s contribution, we will make a monthly distribution to your creditors on your behalf and will deduct our monthly management fee for that distribution. If we do not make a distribution, we do not take our fee.
Back to top
How is my money held until it is distributed to my creditors?
We hold all monies sent to us for distribution to creditors in a client trust account with our bankers. This means that your money is completely protected. Creditors are paid within two working days of receiving payment from you.
Back to top
How long will the plan take?
Because you are making reduced payments, it will take longer for your debts to be paid off. Repaying debt over a longer period may increase the total amount to be repaid. Your credit rating will be affected in the medium to long term which means you could have trouble securing credit in the future. As part of our initial consultation, we will provide you with an estimate on the duration of the plan. Please understand that a Debt Management Plan is not an overnight solution.
Back to top
How much does the Debt Management Plan service cost?
We charge an initial set-up fee (which is equivalent to two monthly payments). This initial set up fee is retained by us for setting up your plan. This may result in a delay of up to two months before creditors receive payment, which will place your accounts into arrears (or further into arrears). We then take a monthly management fee equivalent to 17.625% of each payment you make to us, subject to a monthly minimum of £35, and a monthly maximum of £100. Specific costs will be notified to you in advance.
The initial set-up fee includes:
Drafting a bespoke payment plan
Communication with your creditors, either in writing or by telephone
Calculation and issue of reduced payment proposals
Preparation of the financial statement
We can arrange for a professional representative to collect the pack and any supporting documents from you. If you need help completing the information pack, our representatives will be more than happy to lend a hand.
Each year we complete an annual review. We will review each debt and may contact creditors to ensure the information we hold is updated. We will also review whether the information we hold in relation to your circumstances is up to date, and identify how you may be able to pay off your debts more quickly. The management fee that we take for that month shall be increased by £40 as our annual review fee. This does not affect the agreed monthly payment to us but will affect the payments that we make to creditors.
Back to top
What are the full terms and conditions of the plan?
These will be provided to you in writing prior to you entering into the agreement. A copy can be viewed here.
Back to top
What if my circumstances change?
Because a Debt Management Plan is an informal arrangement, it is easy to change it as your personal circumstances change, and even to replace it with an alternative arrangement if that becomes more appropriate at a later date.
Back to top
What if I am not happy with the service?
We aim to provide a professional service at all times. However, if you are unhappy with the service that you have received, please follow our complaints procedure explaining why you feel that your expectations have not been met.
Back to top
What other debt solutions may be available to me if my circumstances change?
If your circumstances change in the future, please contact us to discuss your situation. This will help us to ensure you have the right solution for your circumstances.
Back to top
Baines and Ernst Ltd