Debt Management 4U https://debtmanagementforyou.com A Debt Management Plan (DMP) is an informal agreement with creditors to reduce debt repayments. It is not legally binding. Wed, 17 Jun 2020 17:38:10 +0000 en-US hourly 1 Can a guarantor loan be included in a DMP https://debtmanagementforyou.com/articles/can-a-guarantor-loan-be-included-in-a-dmp/ https://debtmanagementforyou.com/articles/can-a-guarantor-loan-be-included-in-a-dmp/#respond Fri, 24 Apr 2020 16:16:13 +0000 https://debtmanagementforyou.com/?p=2076 What happens if you include a guarantor loan in a DMP? Can you leave the loan out and keep paying it? Should you complain about the loan?

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You can include a guarantor loan in a debt management plan. However you need to understand the implications for your guarantor.

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What happens if you include a guarantor loan in your DMP?

When you start a debt management plan (DMP), the payments to each of your debts are reduced to an amount you can afford. As a result you no longer have to struggle to find enough to pay all of them each month.

However, if you include a guarantor loan in your plan, the reduced payments will cause a problem. The loan company will then contact the person who guaranteed the loan and demand that they pay instead.

Your guarantor will normally have to pay the full repayment amount each month. The loan company is allowed to start enforcement action against them if they don’t.

Even if a guarantor loan company accepts your Debt Management Plan, they can still demand payments from your guarantor.

Can you leave the loan out and keep paying it?

The only way avoid getting your guarantor involved is to keep paying the loan payments in full. You might be able to do this by leaving the loan out of your debt management plan.

You start your plan with your other creditors, this reduces the payments they get and will hopefully free up sufficient cash to allow you to continue paying your guarantor loan. Once this is paid off, you then increase your DMP payment so your other debts are paid faster.

Of course this solution will only work if you have sufficient surplus income to maintain your loan payment and a sensible amount into your debt management plan.

To start a DMP with your remaining creditors you will normally need to be able to pay at least £100/mth into the plan.

Should you complain about the loan?

Perhaps the guarantor loan you took was actually unaffordable. The fact that you are now struggling with your debts and looking to start a debt management plan would suggest this may have been the case.

In this situation you could make an affordability complaint against the lender. If you win the interest should be written off and you will only have to repay the balance of what you borrowed. In addition the guarantor would be released from the loan. The debt will then be treated as a normal loan and could then be included in your DMP with no further problem.

The person who guaranteed the loan could also make a complaint against the lender if they feel that they were never in a position to repay the loan if you could not. If they won, they would be removed as a guarantor and therefore would be no longer liable to pay the debt whether you pay it or not.

Struggling with a guarantor loan and need further advice? Give us a call 0800 044 5407 or complete the form below and we will get back to you.

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Is interest stopped in a Debt Management Plan https://debtmanagementforyou.com/articles/interest-is-being-added-to-my-debt-management-plan/ https://debtmanagementforyou.com/articles/interest-is-being-added-to-my-debt-management-plan/#comments Fri, 24 Jan 2020 20:36:00 +0000 http://debtmanagementforyou.com/?p=587 How to ensure interest is frozen in a Debt Management Plan. How long will it take for charges to stop? What can you do if interest is still being added?

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Most creditors will stop charging interest if you have a properly managed debt management plan. However they are not legally obliged to do so.

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How to ensure interest is frozen in a Debt Management Plan

Your creditors are not under any legal obligation to stop interest or charges if you start a debt management plan (DMP). You therefore need to make sure you give them a good reason to do so.

The best way of doing this is to make sure that you pay as much as you can into the plan each month. Your living expenses should be reasonable and follow the guidelines that creditors will expect. You must be ready to justify any unusually high expenditures.

You must also honour the agreement and make your payments on time. Regular sustained payments will help build up a level of trust with your creditors. This will give you the best chance of convincing them to help you in return by freezing interest.

It is vital to ensure interest is stopped on all your debts when you use a DMP. If it is not the account balances will reduce far more slowly or may even increase and the plan will last far longer.

How long will it take for the charges to stop?

Your creditors are unlikely to freeze their interest charges from the first month that you start paying into a DMP. They will probably wait for 2-3 months to confirm you are maintaining your payments.

Most banking creditors are bound by the rules of the Financial Conduct Authority (FCA). This means they must treat customers in financial difficulty with forbearance which includes considering suspending, reducing or cancelling further interest charges.

As such once they are comfortable that you are keeping to your end of the bargain, they should start to help you.

After a few months of paying a DMP, one or more of your creditors may pass your account to a debt collection agency. If this happens don’t worry. One of the advantages is that no further interest will then be added.

What can you do if interest is still being added?

One of your creditors may simply refuse to freeze their interest. If so it is probably a waste of time arguing with them as they are unlikely to budge. In this situation the best way to deal with the problem is to try and pay this debt off early.

You are allowed to pay off one creditor and leave the rest in the plan if you want. To do this you will first need a cash lump sum. This could come from either saving or borrowing. You can then make an offer to settle the debt.

If you have been in your plan for 6 months or more, your creditors will often accept an offer of 50% of what they are owed . In return they will write off the remainder of the debt. As a result your DMP will be paid faster as the remaining creditors will get a bigger share of the money you pay each month.

Where interest still being added to your debts after being in a DMP for 6 months or more you could also consider changing your debt management company. You can do this at any time.

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Can I start a Debt Management Plan on benefits https://debtmanagementforyou.com/articles/can-i-start-debt-management-if-i-am-on-benefits/ https://debtmanagementforyou.com/articles/can-i-start-debt-management-if-i-am-on-benefits/#respond Thu, 12 Dec 2019 16:43:24 +0000 http://debtmanagementforyou.com/?p=481 Are you allowed to start a Debt Management Plan if you are on benefits? What if your benefits fall? Is a DMP the best solution on a low income?

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If you receive benefits you can start a Debt Management Plan. However you must be able to pay a reasonable amount towards your debt each month

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Are you allowed to start a DMP if you are on benefits?

The source of your income is not relevant if you want to start a debt management plan (DMP). You can use this solution where part or even all of your income is made up of benefits.

However you will need to think carefully about how much you can afford to pay towards your debts each month. Your income (from benefits and any other sources) must be sufficient to cover all your living expenses with enough spare each month to make a reasonable payment into the Plan.

You can work out how much you can pay by deducting your total living expenses from your total monthly income. The amount left over is known as your disposable income. Ideally this figure should be at least £100/mth.

If you receive benefits your income may be relatively low. Before starting a DMP you must ensure you can make a reasonable payment towards your debt.

What if your benefits fall during the Plan?

If your income falls because your benefits are cut you may struggle to maintain your DMP payments. In these circumstances you might be able to reduce them. You will need to discuss the situation with the organisation managing your Plan.

Where it is possible to reduce your payments, remember that by doing so it will take even longer to repay your debt. As such you should also review whether it is still the best debt solution for you.

If your benefits reduce to a point where you can no longer afford to make any payments into your plan, you will need a different solution. If you have no assets bankruptcy or a Debt Relief Order are sensible options. These will not require you to make any ongoing monthly payments at all.

Where your benefits have been cut because your wages have increased, your total income may stay the same. In these circumstances you might be able to maintain your DMP payments.

Is a DMP the best solution if you are on a low income?

One of the key problems with a DMP is you have to repay all the money you owe. Non is automatically written off. Because of this if the only monthly payments you can afford are low, the Plan could last a very long time.

Where you are facing the prospect of having to make payments for more than 5 years you should also consider the other options. If you are a home owner an IVA might help you become debt free more quickly.

Where you have no assets bankruptcy may well be a better option. Where your only income is benefits you will not have to make any further payments towards your debts. After 1 year your debt will be written off.

If you are already in a DMP you can stop it at any time. You can then switch to a different solution if you feel it would be better for you.

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Can’t pay my DMP what can I do https://debtmanagementforyou.com/articles/what-if-i-cannot-pay-my-debt-management-plan/ https://debtmanagementforyou.com/articles/what-if-i-cannot-pay-my-debt-management-plan/#comments Wed, 27 Nov 2019 20:25:21 +0000 http://debtmanagementforyou.com/?p=574 Options available if you can't pay your Debt Management Plan. Take a payment break. Reduce your payments. Stop your DMP and go bankrupt.

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If you can’t pay your DMP (Debt Management Plan) don’t panic. There are different things you can do.

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Can’t pay your DMP because of a short term problem? Take a payment break

Perhaps you can’t pay your Debt Management Plan because you are facing a short term cash emergency. You might need to pay for an urgent home or car repair. Alternatively a home appliance such as washing machine or cooker may need replacing.

In these circumstances it is often possible to take a payment break from your Plan. This means you suspend your payments for a number of months to free up the cash you need. Speak to your debt management company and they should be able to help.

Don’t stop paying your Plan without speaking to your debt management company. They can then contact your creditors who should be understanding. If your the payments just stop with no warning or explanation the creditors may restart their collections actions.

If you can’t pay your DMP due to a short term cash emergency try to resist the temptation to borrow more. It will be difficult to pay off a new debt and maintain your existing Plan.

Can you reduce your payments if you can’t pay your Plan?

It is common for financial circumstances to change during a DMP. If your income has fallen or your living expenses have increased this may mean you can’t pay your Plan. If you find yourself in this situation you need to speak to your debt management company as soon as possible.

They will help you review your income and living expenses and establish your new disposable income. They will then be able to go back to your creditors and negotiate lower payments to fit your new budget.

Remember, if you reduce the amount you pay into your Plan it will increase the time it lasts. As such reducing your payments can work well if you will still be able to repay your debt in a reasonable period of time or know that your income will improve again before long. If not, as a long term solution it may not be the right option.

Reducing your debt management payments needs to be managed correctly. Don’t do it without first speaking your your debt management company.

Stop your Debt Management Plan and go Bankrupt

Your income may have fallen so much that you can’t pay a reasonable amount towards your debts any more. If this has happened you should think about stopping your debt management plan altogether and using a different solution. You are allowed to cancel a DMP at any time by simply stopping the monthly payments.

If you are not a home owner (or have little or no equity in your property) the next best option for you might be to go bankrupt. Once you are bankrupt you will not have to make further payments towards your debts if you can’t afford to. This means all the stress of your debts is taken away from you.

Of course going bankrupt sounds bad. However where you have no nothing to lose it can actually be a far better solution than a never ending debt management plan. Your credit rating is unlikely to get any worse than it currently is. All your debt will be written off and given you have little or no surplus income, after just 1 year you will be debt free.

Can’t pay your DMP and want more information about whether bankruptcy could be right for you? Give us a call (0800 044 5407) or complete the form below.

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Which is best Debt Management or Bankruptcy https://debtmanagementforyou.com/articles/debt-management-or-bankruptcy-which-solution-is-best/ https://debtmanagementforyou.com/articles/debt-management-or-bankruptcy-which-solution-is-best/#respond Tue, 24 Sep 2019 17:12:00 +0000 http://debtmanagementforyou.com/?p=504 Is it better to use Debt Management or Bankruptcy? Does it depend on the type of debt you owe? What if you are a homeowner? What about your Credit Rating?

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Trying to decide whether Debt Management or Bankruptcy is best? Both are good solutions. There are a number of things you can consider to help find out which is best for you.

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How much can you afford to pay towards your debt each month?

The amount you can afford to repay towards your debt is a very important factor to consider when deciding between Debt Management or Bankruptcy.

A Debt Management Plan works on the basis that you reduce your debt payments to an amount your can afford. You then have to pay these reduced amounts until all of your debt is repaid. If the amount you can afford to pay each month is small in relation to the total debt you owe it is likely to take many years to get out of debt using this option.

A significant advantage of Bankruptcy is that if you cannot pay anything towards your debts you do not have to and you will be debt free in 12 months. If you able to make a payment then you will only have to do so for three years. As such if your objective is to be debt free as quickly as possible Bankruptcy might be a better option.

How much do you owe and to whom?

The majority of unsecured debts can be included in a Debt Management Plan. However some cannot. It is difficult to include a County Court Judgment (CCJ) in this type of debt solution. In addition you cannot include a debt with an attachment of earnings. As such if you have one or more CCJs it might not be for you.

DM4U Tip: If you owe money to HMRC then it is less likely that the Plan will be suitable for you. Normally you will have to make a separate agreement with HMRC to repay this debt within a shorter period of time (say 12 months). This will leave far less funds available to pay your Plan.

If you have CCJs, an attachment of earnings or owe money to HMRC bankruptcy might be a better for you as they can all be included in this solution.

Do you own your own home?

If you are a homeowner you may be thinking that you will need to avoid Bankruptcy because you will automatically lose your home. This is not the case. If you have no equity in your property or it is in negative equity then it is likely that you will be able to keep it. However if you do have equity in your property it might be at risk.

In comparison using a Debt Management Plan causes little or no risk to your home. Even if there is equity in it your creditors cannot force you to sell or re-mortgage to release this as part of the Plan.

DM4U Tip: In a Debt Management Plan your creditors are still allowed to take legal action against you to recover their debt. This could include applying for a charging order against your property. However if your plan is agreed and paid on time this is unlikely. For this reason if you have significant equity in your home debt management is likely to be a better solution for you than bankruptcy.

Is Debt Management or Bankruptcy better for your Credit Rating?

You may be worried that bankruptcy will affect your credit rating for ever and you will not have the option of getting a mortgage in the future. This is not the case. Bankruptcy will be recorded on your credit file for 6 years. However after you are discharged you can start repairing your credit rating. You can also apply for a mortgage.

On the other hand you might think that starting a Debt Management Plan will affect your credit rating less severely. Generally speaking however this is not correct. Once you start the Plan is likely that missed payments and default notices will be recorded on your credit file. These will remain for 6 years thus affecting your credit rating for that period of time.

Given this using a Debt management Plan because you feel it will be better for your credit rating is normally a mistake. In fact your credit rating will not be back to normal until your debts are repaid which could take many years. Having said that it is possible to get a mortgage while you are in Debt Management especially if you want to release home equity to settle your debt.

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How to pay a Debt Management Plan early https://debtmanagementforyou.com/articles/how-to-pay-off-a-debt-management-plan-early/ https://debtmanagementforyou.com/articles/how-to-pay-off-a-debt-management-plan-early/#respond Wed, 05 Jun 2019 17:31:00 +0000 http://debtmanagementforyou.com/?p=521 Why would you pay off a Debt Management Plan early? Find out what you can do to reduce the length of your Plan. Alternative options for writing off debt.

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It is a good idea to pay off a Debt Management Plan early. There are a number of ways this can be achieved.

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Want help with a Debt Management Plan? Give us a call (0800 044 5407) or complete the form below to speak to one of our experts

Why would you pay your Debt Management Plan early?

A Debt Management Plan (DMP) only finishes when your debts are paid or settled in full. As such if you are paying a relatively small amount into it every month the agreement can last a very long time.

The problem is that this is demoralising. It can feel like you are paying each month but never getting any closer to becoming debt free. As a result you might consider giving up. Trying to pay off the Plan early will help overcome this.

It is also unlikely that your credit rating will start to improve until your debts are paid in full or settled. If you are thinking about getting a mortgage in the future you will first need to complete your Plan.

A DMP will last for as long as it takes you to pay or settle your debt in full. Based on monthly payments this could take a very long time.

Pay off your DMP early by increasing your payments

One way to pay off your DMP early is by increasing the amount you pay into it each month. If you do this your debts will be paid faster and your Plan will end sooner. Of course increasing your payments is not going to be easy.

You can try to do this by regularly reviewing your living expenses. See if you can make any savings which would allow higher payments. Of course if your income improves you can more easily increase the amount you pay.

If you are able to make extra money available simply increasing your Plan payment may not the best option. Instead you could use a process called snowballing. Concentrate on overpaying one debt. When this is paid move to the next.

Snowballing can be a useful way to pay off a DMP early. You will feel good each time one of your debts is paid off. You can also use it to target difficult creditors who may still be adding interest.

Use a lump sum to settle your DMP debts

It is possible to pay off your DMP early using a cash lump sum. Your creditors will often be willing to accept a one off cash payment and in return write off the balance of the debt.

If you have been in your Plan for 6-12 months creditors will often accept a lump sum of just 50% of the outstanding balance. Depending on the circumstances they might accept less than this. Perhaps as little as 30%.

If you are able to earn extra income you could save the money required to make settlement offers. Alternatively you could use a cash windfall you have received such as a compensation payment or borrow from a family member or friend.

As and when you have available cash lump sums you can settle your debts one at a time. Those remaining will also be paid off faster.

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Debt Management Company Closed https://debtmanagementforyou.com/articles/debt-management-company-closed/ https://debtmanagementforyou.com/articles/debt-management-company-closed/#respond Thu, 14 Mar 2019 17:23:00 +0000 http://debtmanagementforyou.com/?p=1451 Options if your debt management company has closed. Is the money you paid into your plan safe? What happens to your debts? What action should you take now?

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If your Debt Management Company what will happen to the money you have already paid towards your debts? What action should you take now?

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DMP Company Closed? Give us a call (0800 044 5407) or complete the form below to get advice from one of our experts

Why has your Debt Management Company closed?

There are different reasons why a Debt Management Company might close. The business may have simply decided it no longer wants to manage Debt Management Plans. If this is the case your details may have been transferred to another company.

Alternatively the company may have been forced to close. If the Financial Conduct Authority (FCA) believes the company is providing a sub standard advice service it will withdraw the company’s authorisation. It is then no longer allowed to offer DMPs to customers.

If your Debt Management Plan has been transferred you are under no obligation to work with the new company. You are free to change to a different fee charging or free provider if you wish.

Is the money you already paid into your Plan safe?

All the money you have paid into your Debt Management Plan so far should be safe. Any payments you made into your plan before the company was closed should have been paid out to your creditors in the normal way.

You should no longer make any payments to your Debt Management Company once you learn it is closed. You should immediately cancel any standing order you have set up with your bank. If your payment is taken from a card by continuous payment authority you should contact the bank and cancel this.

If you believe you made a payment to the company after it was closed do not panic. The money will have been paid into a ring fenced client account. As such it is not the company’s money. If the business has gone bust the liquidator will ensure the money is returned to you.

In accordance to FCA guidelines debt management companies should distribute money to your creditors within 5 days of receiving your payment.

What happens to your debts if your Debt Management Company has closed?

The fact that your Debt Management Company has closed does not mean your debts are written off. The balances remain outstanding and you are still liable to pay these.

If you are unsure what the outstanding balances of your debts are you should find out. The best way to do this is to contact all of your creditors and ask them. You can also use this opportunity to explain what has happened.

Many banks have given assurances to the FCA that if a debt management company closes they will allow a period of forbearance. This means that they will not take any action against you for at least 60 days to allow you to put a new payment plan in place.

You are within your rights to ask your creditors for some time to get a new plan in place to deal with your debts moving forward.

What action should you take now?

If your details have been passed to a different debt management company you do not have to work with them. You can use any other fee charging or free debt management provider if you wish. Alternatively there is nothing to stop you managing the plan yourself from now on.

You could also consider alternative solutions such as an IVA or even Bankruptcy. These options may not have been properly explained to you when you started your original Plan. Alternatively they may now be more suitable if your circumstances have now changed.

You must avoid doing nothing. Your outstanding debts still exist and will not go away on their own. Your creditors will restart their collection actions against you unless you take action.

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Are you Blacklisted by a Debt Management Plan? https://debtmanagementforyou.com/articles/are-you-blacklisted-by-a-debt-management-plan/ https://debtmanagementforyou.com/articles/are-you-blacklisted-by-a-debt-management-plan/#respond Sun, 03 Mar 2019 18:35:00 +0000 http://debtmanagementforyou.com/?p=1440 What does Blacklisted really mean? Will starting a Debt Management Plan mean you get Blacklisted? How long are you Blacklisted? Are family members affected?

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Being Blacklisted is one of the side effects of a Debt Management Plan. The fact you start a Plan means that your ability to get credit will be negatively affected.

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What does Blacklisted really mean?

The term blacklisted is commonly used to describe someone who cannot get credit. However there is no actual Black List where your name appears. The reason you cannot get credit is simply because you have a poor credit rating.

Your credit rating will be negatively affected if you fall behind with your debt repayments. When this happens your creditors will normally record the missed payments on your credit file.

If you continue to miss payments a default notice may also be recorded. The more missed payments and defaults you get the worse your credit rating will become. This will prevent you from being accepted for new credit.

Missed payments and default notices are recorded on your credit file. This will result in your credit rating becoming poor. It is commonly known as being blacklisted. However there is no actual Black list as such.

Do you get Blacklisted if you start a Debt Management Plan?

A Debt Management Plan is an agreement with your creditors allowing you to reduce your debt payments. Even if the creditors agree to the Plan it will still result in you being blacklisted.

Your creditors will normally issue default notices against you which will be recorded on your credit file. Alternatively they may actually state you are in an Arrangement to Pay by adding the marker “AP” on your file.

These default notices and Arrangement to Pay (AP) markers will negatively affect your credit rating. In other words it will become poor even though the creditors agreed to your reduced payments. This will then prevent you from getting new credit facilities from most high street lenders.

How long does your credit rating remain poor?

You will normally remain blacklisted the entire time you are in your Debt Management Plan. As such the length of the blacklisting will depend on how long your Plan lasts. This could be a number of years.

Once you have completed your Plan your credit rating will then begin to improve. However the negative effects of the Plan are likely to continue to damage your credit rating for some time after your final payment has been made.

If defaults were issued against you these will remain recorded on your credit file for six years from the date they were put on. An Arrangement To Pay marker will remain on your credit file for 6 years from the date the debt was paid.

Once your Debt Management Plan has ended there are things you can do to help your credit rating improve. These include using a so called credit repair credit card. This will help you build up records of positive credit usage.

Are Family Members Blacklisted by your Debt Management Plan?

The fact that you have been blacklisted should not affect other members of your family or other people living with you. Each individual living in your household has their own personal credit file.

If you start a Debt Management Plan missed payments and default notices are recorded on your credit file. These issues should not be recorded on anyone else’s file. As such others are not blacklisted and their credit ratings remain intact.

However the credit reference agencies can make a mistakes. It is possible that the negative records on your file could be copied erroneously to the file belonging to a family member. If this happens it will affect their credit rating. However the problem is relatively easy to fix using a process called disassociation.

Your Debt Management Plan will result in a family member or third party being blacklisted if you have debt in joint names. In these circumstances the only way they can maintain their credit rating is by making the debt payment on time themselves.

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Use a Debt Management Plan to resolve Overpaid Tax Credits https://debtmanagementforyou.com/articles/use-a-debt-management-plan-to-resolve-overpaid-tax-credits/ https://debtmanagementforyou.com/articles/use-a-debt-management-plan-to-resolve-overpaid-tax-credits/#respond Mon, 29 Feb 2016 16:30:55 +0000 http://debtmanagementforyou.com/?p=1433 Can overpaid Tax Credits be included in a Debt management Plan? Can a DMP ever help resolve Tax Credits debt? Solutions where Tax Credits are written off.

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If you have been overpaid Tax Credits HMRC will require the money to be returned. But what can you do if the debt is large and you are not entitled to further payments? Using a Debt Management Plan may offer a solution.

Want help with a Debt Management Plan? Give us a call (0800 044 5407) or complete the form below to speak to one of our experts

Can overpaid Tax Credits be included in a Debt Management Plan?

Tax Credits overpayments are debts owed to HMRC. They can often be repaid by HMRC reducing future benefits payments. However this may not be possible if you are no longer eligible for the benefit or the debt owed is large.

In these circumstances a Debt Management Plan could be used to resolve the problem. Despite being owed to HMRC Tax Credit debts are unsecured. As such they can be included in the solution.

The problem however is that normally HMRC will want to see Tax Credit debt repaid within 12-24 months. This may not be achievable with a Debt Management Plan. If the amount you are able to pay towards all your debts is small the Plan will normally last more much longer than 2 years.

DM4U Tip: HMRC are often reluctant to agree to their debts being repaid as part of a Debt Management Plan. This is because the plan itself will normally last far longer than 24 months.

Can you ever resolve Tax Credits debt with a Debt Management Plan?

If HMRC do not agree to a Debt Management Plan you may still be able to use this solution to resolve Tax Credits debt. This could be the case if you have other debts you need to pay.

You could use a Plan to reduce the payments to your other unsecured debts. This would then free up cash which you can use to repay your Tax Credits. As long as they are paid within 24 months as required the solution could work very well.

You would need to make a separate Time to Pay agreement direct with HMRC. Once this is in place the disposable income you have left over is available to start a Debt Management Plan for your remaining debts.

Which debt solutions can include Tax Credits overpayments?

Of course you may simply be unable to agree a 12-24 month Time to Pay arrangement with HMRC. It will be impossible if you do not have the spare cash to make the necessary payments. Even if you do what if there is nothing left to start a DMP for your other debts?

If you do not have sufficient spare cash to repay your Tax Credit overpayments a Debt Management Plan will probably not work for you. In these circumstances a better solution might be a Debt Relief Order or IVA.

If you are renting and have a low income you should consider a Debt Relief Order (DRO). Once in place this solution means you no longer have to repay HMRC and will be debt free within a year.

DM4U Tip: A Debt Relief Order is only available if your total unsecured debt is less than £20,000 and you have less than £50/mth disposable income. However if you do not meet these criteria Bankruptcy may also be a sensible solution to think about.

If you are a home owner an option you can consider is an Individual Voluntary Arrangement (IVA). You can include any money owed to HMRC and other unsecured creditors in this agreement. However you must be able to make payment of at least £80-£100/mth towards your debt.

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House Blacklisted by a Debt Management Plan https://debtmanagementforyou.com/articles/house-blacklisted-by-a-dmp/ https://debtmanagementforyou.com/articles/house-blacklisted-by-a-dmp/#respond Wed, 09 Sep 2015 10:08:51 +0000 http://debtmanagementforyou.com/?p=1393 A Debt Management Plan does not leave your house blacklisted. Are other people living in your house blacklisted? How to get a mortgage during your DMP.

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If you start a Debt Management Plan your credit rating will be negatively affected. As a result you will find it much more difficult to get credit personally. But how are the other people you live with affected? Is your house blacklisted? Will you ever be able to get credit again?

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A Debt Management Plan will not leave your House Blacklisted

It is important to understand that a Debt Management Plan (DMP) will have a negative impact on your personal credit rating. The Plan is informal and not recorded on the insolvency register. However your creditors will issue default notices against you. These will be recorded on your credit file for 6 years.

But starting a DMP will not leave your house blacklisted. It is a common myth that if you have a poor credit rating this will somehow affect the property you live in. This is not the case. A property itself does not have a credit rating. It is your personal credit file that is affected. If you move your credit rating will move with you. The house itself is left unaffected.

DM4U Tip: Should you be concerned if you move into a property and discover that the previous residents had credit problems? The answer to this is no. Your credit rating cannot be affected by a third party who used to live in your property.

Are the other people living in your House Blacklisted?

If you have a poor credit rating this does not blacklist other people who live at the same address. Their ability to get credit is not affected by your Debt Management Plan. This is because everyone has an individual credit file. The fact that you have a poor credit rating does not mean that this will rub off on other people.

The reason why the blacklisting myth has come about is that it is possible for the credit reference agencies to make mistakes. Sometimes a negative record from your file is copied to the file of someone who is living with you in error. If this happens it could cause a problem if they apply for new credit. There is a particular risk of this if you share the same surname.

Having said that if a mistake like this happens it is relatively easy to fix. The innocent party simply has to inform the credit reference agency and request to be disassociated from your debts. The agency must comply with this request under the Data Protection Act. Anyone living with you can easily check for issues like this by getting a copy of their credit file.

Getting Credit or a Mortgage if you start a Debt Management Plan

Although a Debt Management Plan will have a negative effect on your credit rating you can get credit again in the future. Generally speaking you will not be able to borrow more on an unsecured basis until your Plan is finished. However it is possible to get a mortgage during a DMP.

DM4U Tip: If you are already a home owner you might want to release equity from your property to settle your Debt Management Plan early. There are mortgage lenders who will lend to you during the Plan as long as you have maintained your payments on time for the last 12 months. However you will need to get advice from a specialist mortgage broker.

It is not sensible to try and take more unsecured credit until your DMP is finished. If you have a financial emergency you might be tempted to borrow from a Payday lender. However it will be difficult to repay this new debt and maintain your Plan payments. As such a better way to manage a short term cash requirement is to agree a payment break from the Plan.

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