What if you get inheritance during a debt management plan
If you receive an inheritance during a debt management plan, you are allowed to keep all the money. You are not obliged to use any of it to pay off your debt.
Included in this article:
- Can you keep inheritance during a debt management plan?
- Could you use the money to pay your Plan early?
- Can you settle some debts and leave others in your Plan?
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Can you keep inheritance during a debt management plan?
The short answer to this question is yes. As with any type of windfall, if you get an inheritance while you are in a debt management plan (DMP), the money is yours to keep and do with as you wish.
The Plan is not formal or legally binding. Because of this, all you have to do is continue paying the reduced payments as agreed.
If your income increases or you get extra money for what ever reason, you don’t have to increase the payments you are making and you don’t have to pay off any of your debt more quickly.
You don’t even have to tell your creditors about the extra cash you have received. You can spend it on other things or save it if you wish. It is entirely your choice.
The flexibility to do what you like with extra money such as inheritance is one of the main advantages of a DMP over other debt solutions.
Could you use the money to pay your Plan early?
You are allowed to pay off the outstanding balance of the debt you owe in your Plan at any time. If you have received an inheritance, you can use the money to do this.
One option is to simply call each creditor (or ask your debt management company to do so on your behalf) and tell them you want to pay the balance owed in full. However, paying off everything you owe is not always the smartest option.
Given you can now pay a lump sum, you should be able to settle your accounts for less than the total amount owed.
Where you have been paying into your Plan for 6-12 months or more, each creditor might accept as little as 50% of the total balance owed given you can pay it straight away. You now have the option to do this because you have your inheritance cash available.
Using your inheritance to make settlement offers will mean you can write off a considerable amount of your debt.
Can you settle some debts and leave others in your Plan?
You might want to pay off or settle some of your debts but leave your debt management plan running for the rest.
There may be different reasons for this. Perhaps, you have not have received a sufficient amount in your inheritance to cover all your accounts. Alternatively you may have other plans for some of your cash. As a result, there won’t be sufficient left to cover everything you owe.
The flexibility of your DMP allows you to do this. You are allowed to pay off or settle some of the debts included in the Plan and leave others.
Doing this will mean the debts you leave in the Plan are also paid off quicker because their share of the monthly payment will go up. Of course this will depend on you maintaining the same monthly payment.
Some debt management companies (in particular Step Change) might tell you that paying off just some of your debts is not allowed. This is not true. In this situation there is nothing to stop you contacting the creditors and dealing with them directly yourself.
Want advice about what to do if you have received inheritance or a different type of windfall during your DMP? Call us (0800 044 5407) or complete the form below. Its free and confidential.
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