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Debt has increased since debt management plan

This advice applies to Scotland

Having a debt management plan (DMP) may make paying off your debt more manageable but you might find that your overall debt actually increases over time.

This page explains why your debt might increase while you're in a DMP and what you can do about it.

Why has your debt increased?

It's not uncommon to find that even after making several payments on your DMP, your overall debt has increased. The most common reason for this is that your creditors may still be charging you interest and late fees on your debt. If this happens, it will take longer to pay off your debts and your overall debt may increase if your monthly payment doesn't cover the interest and charges.

Can you get the creditors to freeze the interest?

Your DMP provider will normally try to negotiate with your creditors to freeze any interest and other charges when they set up your DMP. They should tell you which creditors have agreed to this and which have not before you start your DMP.

If some of your creditors haven't agreed, you can ask your provider to try negotiating with them again. You might also want to try contacting the creditor yourself to see if they'll agree to freeze the interest and charges.

Can you increase your payments?

The amount you pay into your DMP doesn't have to be set in stone. If your debt is increasing because of interest and charges, you might want to think about whether you can afford to increase your monthly payments. Think carefully before you do this, as you don't want to over-stretch yourself and find out that you don't have enough money left to pay for your priority debts and essential living costs.

If you think you can afford to increase your payments, speak to your DMP provider who will help you work out whether this is possible.

Is a DMP still the right choice for you?

If it's not a good idea for you to increase your DMP payments, you might want to re-consider whether the DMP is the right choice for you. There may be other options which could help you manage your debts without increasing the amount you owe.

Remember that a DMP isn't legally binding, so you do have the right to cancel it, although you may not get a refund of fees or charges. Think carefully before cancelling your DMP or choosing another debt solution.

Were you misled?

Your DMP provider must give you full information about your monthly payments, the total cost and how long it will take to pay off your debt before you sign a contract with them. They should also give you details of which creditors have agreed to freeze interest and charges and which ones haven't, along with information about how this will affect your DMP.

If your provider didn't give you this information, or made promises about reducing your debt which have turned out not to be true, you may have been misled. You should think about cancelling your DMP and making a complaint about the provider.

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