Already in a DMP
If you are already in a DMP (Debt Management Plan) it will normally last until you have repaid your debt in full. Depending on how much you are able to pay each month this could take a number of years. During this time you are likely to experience changes in your financial circumstances. You could find yourself in a position where you can increase the amount you pay into your Plan. Alternatively you might need to reduce your payment. You may have a financial emergency or be in a position where you can settle some or all of your debts early. Because of the informal and flexible nature of the Plan all of these options are possible.
Government Advice about Dealing with Debt
As well as the information found on this website the Government’s Insolvency Service has produced a useful guide to personal debt solutions which you might also find useful: “In Debt – Dealing with your creditors”.
The Money Advice Service (MAS) are an independent service set up by the Government to provide people with free advice about all aspects of personal finances. For help from MAS if you are struggling with debt please follow this link:MAS – Help if you are struggling with debt.
It is also recommended that you read this one page document produced by MAS entitled “Dealing with debt – 5 things you should know”.
Can you add new debts if you are already in a DMP?
It is possible that you forgot to add a debt at the beginning of your Debt Management Plan. Alternatively you might have taken on extra debt such as a Payday loan during the Plan. It is possible to add these debts to your existing Plan. However if the monthly payment you make cannot increase all of your creditors will receive a smaller amount. As such new payment agreements will have to be negotiated with each of them. It is therefore best to try and avoid borrowing more while you are in the Plan. If you have a financial emergency it can often be better to consider taking a payment holiday from your Plan rather than borrowing more.
What if your circumstances change during a DMP?
Because a Debt Management Plan is likely to last a number of years it is usual for your financial situation to change during this time. The flexibility of a Debt Management Plan means that you can change the payments you make into it at any time. If your circumstances improve you may be able to pay more and finish the Plan quicker. If things get worse it is possible to reduce the amount you pay into the Plan. However this will require careful consideration and can be time consuming. It is likely that you will need to get agreement for the new payment amount from each creditor.
Can you get a Mortgage during a Debt Management Plan?
During the Credit Crunch it was very difficult to get a mortgage if you were in a Debt management Plan. However as time has passed a number of mortgage lenders have become willing to offer mortgages to people who are still in a DMP. This is particularly the case if you have been in your Plan for over a year and can show that you have made the last 12 months payments on. If you are already a home owner you now have the option to consider re-mortgaging. The equity released can then be used to pay off your unsecured debts.
Can you settle your Debt Management Plan early?
It is possible to settle your debts early during a Debt Management Plan. If you are given or lent some cash or you manage to save this can be offered to your creditors in return for writing the balance of your debt off. Settling debt like this can be an extremely good way of reducing the overall time it takes to complete your Plan. You do not have to settle all of your debts at the same time. It is perfectly acceptable to settle just one or two and leave the rest in the Plan. The remaining debts will be repaid even faster as they will now share more of the payment you make each month.
How to improve your credit rating after a DMP
You can start to improve your credit rating while you are already in a DMP by ensuring that you make the payments regularly and on time. If you do this it will be less likely that any of your creditors issue further Default Notices against you. Once you have completed your Plan the best way of repairing your credit rating is to start to use credit responsibly. It is possible to do this with a Credit Repair Credit Card. If you only spend what you can afford to repay in full each month you will never have to pay high interest charges. Your credit rating will improve because the record of you using and repaying credit will gradually build up on your credit file.
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