Which is best a Protected Trust Deed or DMP?

If you're struggling with a debt problem and looking for a solution, then you're going to need to understand the options available to you if you're to make the right decision.

And, as you know, making the wrong decision could be an expensive mistake to make.

So don't rush the decision. Even if you're being put under pressure by your creditors, it's better to make sure you're happy with the choice you're making before you commit yourself to any particular action.

Personal Circumstances

The answer as to which of these two solutions will suit you best will be heavily influenced by your personal circumstances.

Each solution has its pros and cons and for you to arrive at the right answer, you'll need to understand the impact of each when applied to your personal circumstances.

Here are the general differences between a Protected Trust Deed solution (PTD) and a Debt Management Plan (DMP).

Legal Status

PTD: The PTD is a legally binding debt solution. On acceptance all creditors are legally bound by its terms.
Consequently, creditors are legally obliged to freeze interest, stop charges, stop legal action and refrain from contacting you about the repayment of your debt.

DMP: Because a DMP is an informal solution it is not legally binding and, consequently, can't provide any of these assurances.
Instead an approach would have to be made to the creditors to see if they would agree to any of these informal requests.

Duration

PTD: A PTD generally has as a fixed term of 4 years, although this can be extended if it benefits the applicant. After the pre-agreed time has elapsed the PTD finishes.

DMP: A DMP has a repayment term that is determined by two things. The size of your debt and the amount you can afford to repay. A DMP continues until all the debt has been repaid.

Debt write-off

PTD: One advantage of having a fixed term arrangement that requires you to only make payments based on affordability is that you may benefit from some debt write-off. Any outstanding debt remaining at the end of the arrangement must be written-off by the creditors.

DMP: The DMP does not provide any debt relief or forgiveness. There is not debt write-off and the whole debt must be repaid.

Legal Strength

PTD: A PTD is a formal debt solution that acts as an alternative to bankruptcy and, once protected, creditors forfeit their rights of enforcement.

DMP: A DMP cannot protect you against legal action being taken by a determined creditor, which could, ultimately, lead to bankruptcy.

Flexibility

PTD: A PTD has a degree of flexibility if required, especially if you experience payment problem. The Trustee has the power to make reductions to your payments or even offer a payment break if necessary.

DMP: Because they are informal arrangements, DMPs are very flexible. You are at liberty to increase or decrease your payments at will.

Fees and Costs

PTD: All the fees and costs are included within your affordable monthly payment and do not add any extra time to the term. As a result, your creditors have to stand the cost of your arrangement.

DMP: A DMP's costs must be paid by the applicant. This manifests itself as a lengthening of the repayment term.

Debt levels

PTD: PTDs can accommodate any debt level above £5,000, usually, the larger the debt, the more effective the PTD will be.

DMP: DMPs tend to be better at dealing with smaller debt levels, where there is a good chance that your personal circumstances might improve enough to repay the debt more quickly.

Homeowners

PTD: A PTD will protect you from having to sell your home, although you will be expected to release equity from your home under the terms of your arrangement.
Please Note: Professional guidance is advised when trying to understand how a PTD will affect your equity.

DMP: As we've already mentioned, a DMP is an informal solution, so you're not obliged to disclose your assets.

Size of problem

PTD: A PTD has a repayment term of, usually, 4 years. If you have financial resources sufficient to make a full repayment of your debt within a 4 year time frame, then a PTD would probably be an unsuitable option.

DMP: If you reasonably confident that you will be able to repay your debts within what you consider to be a reasonable time frame, then a DMP will allow you to do so.

Take Professional Advice

The brief comparison above demonstrate quite clearly where the differences between these two solutions lie.

However, it'll be down to you to determine which solution will best suit your personal circumstances.

It may be a very difficult choice for you to make, which is why it's a good idea to take professional advice before you make that decision.

If you would like to have a chat about your circumstances, or discuss any of the points above, simply call 0800 088 7502

Alternatively complete the form below and one of our adviser will call you back at your preferred time.

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