Which debts go into a Debt Management Plan?
When considering whether a Debt Management Plan (DMP) is suitable for you one of the main things to think about is which debts you can include. Secured debts such as your Mortgage cannot be included and still have to be paid. However generally speaking all of your unsecured debts can be included. Having said that there are some unsecured debts which may have to be left out. In addition you can choose to leave out unsecured debts if you want to.
Which debts are unsecured and which are secured?
Unsecured debts are those that are not secured against any of your property. They generally include personal loans, credit cards, store cards, overdrafts and payday loans. These can be all be included in a Debt Management Plan. Secured debts are secured against property such as a mortgage or secured loan or HP against a car. These cannot be included.
You need to ensure that you have sufficient money in your living expenses budget to continue to make your secured debt payments. The amount you can pay into your Plan is calculated once these have been budgeted for. If you do not maintain these payments you risk the repossession of the item that the loan is secured against.
Can debt owed to HMRC be included in a Debt Management Plan?
Tax and other debts owed to HMRC are unsecured. As such you would think that these can be included in a Debt Management Plan. However HMRC will generally not agree to their debt being included because it will take too long to repay.
Once you start your Plan the creditors will normally only receive small payments towards their outstanding debt each month. This means that it will normally take a number of years to repay them. These time scales are generally not acceptable to HMRC. They usually require their debt to be repaid within 12 months. Therefore if you have HMRC debt you will normally have to leave out this debt and negotiate a separate payment plan with them.
DM4U Tip: Trying to negotiate separately with HMRC will not work if it means that you have nothing left over to pay into a Plan with your other unsecured creditors. For this reason if you have HMRC debt it is normally preferable to consider a solution where these debts can be included such as an Individual Voluntary Arrangement (IVA)
Can you include a CCJ or Attachment of Earnings in a Debt Management Plan?
If one of your unsecured creditors has already taken out a County Court Judgment (CCJ) against you this cannot simply be included in a Debt Management Plan. You must continue to pay any CCJs as ordered by the Court. If you do not this could result in further legal action being taken against you. As such you can only include a CCJ debt if you first apply to change the Order.
An Attachment of Earnings is a court order to pay a debt from your monthly salary before you get it. Starting a Debt Management Plan will not stop this deduction as it is a Court Order. As such any debts which are paid through wage attachments cannot be included in your Plan.
If you have a number of CCJs or a large Attachment of Earnings this may mean that you have insufficient surplus income to start a Plan with your remaining creditors. It might therefore be better to consider an alternative debt solution where these debts can be included.
Which debts can I leave out of my Debt Management Plan?
You can choose to leave one or more of your unsecured debts out of your Debt Management Plan if you wish. There is no legal requirement to include them all. There might be one or more creditors that you want to keep paying in full so you can continue to use these accounts. However the problem will be how to do this.
Unless they are a secured or preferred like HMRC you will not be able to include a budget in your living expenses to pay any debts you want to leave out. This is would be seen as unfair treatment by the remaining creditors. As a result they would be unlikely to agree to your Plan and continue to add interest and charges to your account. This would severely limit your Plan’s success.
The only way to maintain the payments to a creditor you chose to leave out is from savings you can make from your agreed living expenses budget. However this will put a great deal of pressure on your ability to maintain your Plan payments and could risk its failure. As such it is normally best to include all your normal unsecured creditors.
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