Is it possible to leave out debt from a DMP
If you use a debt management plan you can leave out debt if you want. In this way it is more flexible than other debt solutions. However keeping one or more debts out may cause some problems.
Included in this article:
- Can you choose to leave out one of your debts from a DMP?
- What are the potential issues if you leave out a debt?
- Can you add an excluded debt later?
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Can you choose to leave out one of your debts from a DMP?
A debt management plan (DMP) is one of the most flexible debt solutions. You can therefore choose to leave out debt if you wish.
One of the main reasons people do this is if they have a guarantor loan. Including this debt in the Plan would mean the guarantor then becomes liable for the payments.
This situation is avoided if you leave the debt out and continue to pay it. You can then use the Plan to reduce the payments on your other debts.
Another debt which is commonly left out of a DMP is a CCJ. It can be difficult to include this debt as reducing the payment may have to be agreed by the Court.
Some debts can’t be included in a debt management plan. These include secured debts such as a mortgage and money owed to HMRC.
What are the potential issues if you leave out debt?
Keeping a debt out of your DMP may be a tempting option. However doing this does not come without issues.
The most significant problem is affordability. If you leave a debt out you have to keep paying it at the agreed amount. This will significantly reduce the surplus income you have available for paying the remainder of the creditors you do include in your Plan.
Another problem is that you will need to tell the creditors you include that you are leaving one out. The monthly payment you are making to them must be accounted for in your living expenses budget. The included debts may not like this and could refuse to accept the Plan.
That said, creditors will normally be ok if the excluded debt can be paid off relatively quickly, and a commitment made that the associated payment will then be used to increased the amount paid into the DMP.
Continuing to pay a guarantor loan may mean that you have insufficient surplus income to start a debt management plan for your other debts.
Can you add an excluded debt later?
You may want to add a debt to your debt management plan that you previously left out. Perhaps you thought you would be able to pay it, but now realise you can’t.
This is possible at any time. However it will mean that the overall length of the plan will increase. More debt now has to be repaid and each of the original creditors will receive slightly less each month.
At the same time as adding the new debt, you should consider increasing the monthly payment you make into it. However if this is not possible it should not matter.
Your creditors will normally accept the change if they can see you are doing your best to pay back as much as you can.
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