People are becoming slaves to DMPs

Individuals face making DMPs payments for over ten years

By Insolvency News, 8 March 2010. Posted in Personal

Over a quarter of individuals in debt management plans (DMPs) will have to face making payments for over ten years, according to figures released today by insolvency trade body R3.

 

Debt management plans, which were originally introduced in the industry as a short-term repayment plan, are unregulated and have no set length of time or limit on the amount of debt. 

R3 trade body said that on average individuals in a DMP earn £1,400 a month and pay back approximately £250 a month.

With 26 per cent of DMPs lasting ten years or more Peter Sargent, R3 president, argued that inappropriately lengthy plans meant people are becoming "slaves to their debts."

He said: "DMPs can play an important role in offering manageable solution to individuals who are able to pay back their debts. However the sheer length of some plans indicates that the amount of debt these individuals have is too large for a DMP."

The research also shows that 46 per cent of insolvency practioners have seen DMPs fail because the monthly repayments were too high. 

While 35 per cent of individuals said that other options for dealing with their debts, such as an individual voluntary arrangement, or bankruptcy was not discussed before entering a DMP.

And 22 per cent of people in a DMP say that they were not asked for proof of their income or expenditure before their plan began.

Sargent said: "It is incredible that organisations set up DMPs without these vital details. If this information is not verified at the start the monthly payments may be set too high – dooming the plan from the outset."

Sargent added that one in three individuals currently in an IVA were previously in a DMP, as were the same proportion of undischarged bankrupts. R3 said that this suggests that in certain instances, DMPs can prolong distress rather than solving the problem adding that another solution would probably have been more suitable from the star

 

Comments What do you think?

  • Bonecollector | 12:42 9 March 2010

    "Slaves to their Debts" is quite right and that is as a direct result of virtually all the Banks and Credit Cards forcing IP's to seek approval for IVA's through TIX and the setting of disproportionately high hurdle rates (40% plus return) to get IVA's passed.

    So if the debtor cannot jump that hurdle...it's a never ending DMP or Bankruptcy.

    In fact a more jaundiced eye might see TIX as a vehicle to stop IVA's and force DMP's thus giving the banks a better return than 40%.

    But it's a bit rich that IP's are now concerned about DMP's when they so easily rolled over without a fight and agreed to have TIX enforce an IVA protocol...all it would have taken was a few IP's with steel nuts - after all they are the licence holders and TIX would have been consigned to the rubbish pile!

    However, don't be misguided by IP's apparent concern for the plight of debtors in DMP's...anyone that knows the insolvency industry, also knows that behind the headlines, the whole industry is on its knees it's so short of work.

    And all this huff is an attempt at bringing DMP's under the control of IP's...so they may better top up their own depleted coffers.

    The answer is to rebel against TIX...to make IVA's the real solution and the alternative to bankruptcy they were intended to be.

    TIX won't like it, debt collection agencies and debt mangement factories won't like it and the banks will hate it. But at least debtors will get a fair and legal deal and IP's will earn some more corn from honest endeavour.

    QED...when it comes to TIX - just say NO!

  • Anonymous | 13:17 9 March 2010

    DMPs are lightly regulated (if at all) and unrecorded . IPs don't want the DMP work, want they want is debtors to be advised on the best solution, DMPs are being used by creditors as a vehicle to avoid reporting bad debts.
    The true number of individuals in some sort of 'debt forgiveness' program will not be known until all types of personal insolvency procedure are recorded.

  • South Coast | 12:24 10 March 2010

    I struggle to think of many circumstances when the correct professional advise to a debtor could be to consider a DMP. The providers and banks & finance houses are only considering themselves.
    The debtor is not being given proper professional advice, most see the advertising or visit charitable organisations who do not know better (brainwashed!!!)
    IVA's are not the answer due to cost and were not intended to deal with these situations. A simple OR driven devise for debts totalling less than £25k/£30k is required or they should go bankrupt.

    IPs will not do the work they have the same strange view of their value to society as city bankers, solicitors and chartered accountants.

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