Is it possible to add new debt to a Debt Management Plan
There is nothing to stop you adding a new debt to your debt management plan at any time. However there are implications you need to be aware of.
Included in this article:
- What happens if you add a new debt to a DMP?
- What if your management company won’t help?
- How to avoid getting additional debt during your plan
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What happens if you add a New Debt to a DMP?
You can add a new debt to an existing debt management plan (DMP). You might need to do this if you forgot about one when you set up the plan. Alternatively you may have borrowed more which you are now struggling to repay.
That said there are some implications. Remember, if you add a new debt but continue to pay the same amount each month, it will take longer to finish the Plan.
In addition, the original creditors will start receiving a smaller amount. They may not react well to this. They could restart their collections actions against you or start reapplying interest to your accounts where previously this had been frozen.
Avoid many of the problems associated with adding a new debt to your DMP by increasing your monthly payment if you can.
What if your management company won’t help you add a new debt?
As soon as you realise that you are struggling with a new debt you need to speak your debt management company. If you are using a commercial company they should be able to help.
More often than not they will be able to renegotiate the payments with your existing creditors. They can often ensure the new account is added without negative reaction from your creditors.
That said, some debt management providers may refuse to help. They may argue that the fact you have got a new debt means you have broken your agreement and they can no longer work with you.
If your service provider will not help you, you could change to another management company.
Rather than adding a debt to your DMP you might now be better off switching to a different solution such as an IVA.
How to avoid getting additional debt during your Plan
Generally speaking you should not take on new debt during your DMP. However, in a financial emergency you may feel you have no choice.
But there may be an alternative. This is to agree a payment holiday with your original creditors. A payment holiday allows you to put your normal Plan payments on hold for few months. You can then use the money you save to pay for your financial emergency. Once this is over you then start your payments again.
You must not take a payment holiday without first agreeing this with all of your creditors. If you simply stop paying them without warning they will restart their collections enforcement procedures against you.
With any luck, if you explain the reason for needing the payment holiday and agree it with them in advance they should understand. As long as the payment holiday you need is not too long and your explanation is reasonable.
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