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, 20 Jan 2021 17:50:38 +0000 en-US hourly 1 Home equity and a DMP https://debtmanagementforyou.com/articles/if-i-start-a-debt-management-plan-will-i-have-to-release-equity/ https://debtmanagementforyou.com/articles/if-i-start-a-debt-management-plan-will-i-have-to-release-equity/#respond Sun, 01 Nov 2020 17:58:29 +0000 http://debtmanagementforyou.com/?p=491 Can you do a DMP if you have home equity? Do you have to release equity during the plan? Is it possible to settle a DMP with equity?

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Homeowners will often choose a debt management plan over other debt solutions because home equity can be protected.

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Can you do a DMP if you have home equity?

You don’t have to give details about the amount of home equity you have in your property if you start a debt management plan (DMP).

Your creditors do not require further details about your home. They will decide whether or not to accept your reduced payments on the basis of your income and expenses budget and the amount you will repay each month.

This means you can start a DMP even if the amount of equity in your property far exceeds the amount of debt you include in the plan. Your creditors don’t mind because you are still committing to repay everything you owe them. Just at a slower rate.

Your creditors are not agreeing to write off any of your debt in a DMP. As such they do not require you to release home equity to compensate for this.

Do you have to release any equity during the plan?

If you start a debt management plan you do not have to commit to release any equity from your property to repay your debt.

You may have a significant amount of home equity. However generally speaking this is not taken into consideration when your reduced payments are agreed. Your creditors do not expect you to release any of it.

The fact that home equity is protected is one of the main advantages of using this type of debt solution for home owners.

That said, a DMP does not give your home any legal protection. Even after the plan is in place, any one of your creditors could still apply for a legal charge against it to secure their debt. This would in effect reduce the equity in your property.

A DMP give no legal protect to your property. Your creditors can still apply to secure their debt against it with a charge.

Is it possible to settle a DMP early with home equity?

You are not obliged to release any of your home equity during a Debt management Plan. However it may be in your interests to do so voluntarily. You can use the lump sum you release to make settlement offers to your creditors.

If these are accepted, this clearly provides a huge benefit. It allows you to both write off some of the debt you owe, and to significantly reduce the length of your plan overall.

However, releasing home equity is not easy if you are in a DMP.

If you are in a DMP, your credit rating will be poor. As a result it is unlikely that your current lender will be able to help with a remortgage. As such you will need to consider a sub prime lender or a secured loan. Both of these options will be expensive and should not be done without careful consideration.

Are you a home owner and considering a debt management plan? Give us a call (0800 044 5407) or complete the form below to get further advice.

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Cancel your DMP and start an IVA https://debtmanagementforyou.com/articles/can-i-start-an-iva-if-i-already-have-a-debt-management-plan/ https://debtmanagementforyou.com/articles/can-i-start-an-iva-if-i-already-have-a-debt-management-plan/#respond Thu, 15 Oct 2020 17:58:12 +0000 http://debtmanagementforyou.com/?p=542 Why would you cancel your DMP and start an IVA? How to cancel your debt management plan. What are the potential downsides?

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You can cancel your DMP at any time and transfer to an IVA if you feel this is a better solution for you.

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Why would you cancel your DMP and start and IVA?

There are various reasons why you might decide to cancel your debt management plan (DMP).

A major problem is the time it will take to become debt free. Most DMPs last for many years. In addition you may still be getting hassle from your creditors or they may still be adding interest to your accounts.

An IVA will resolve these problems. The agreement lasts for a fixed period (normally 5-6 years). After this your payments stop and any outstanding debt is written off. You are debt free. In addition, your creditors must also stop charging interest by law.

Starting an IVA will often help you become debt free far more quickly than a debt management plan. You also get legal protection from your creditors.

How to cancel your DMP

Once you decide to cancel your debt management plan the process is quite simple. All you have to do is stop making your payments. If you are paying by standing order or direct debit just instruct your bank to cancel the payment. Normally you should wait to do this until your IVA is in place.

Your debt management company will probably contact you to find out what is wrong. You are free to tell them you have cancelled because you are starting an IVA.

They may try to convince you to stay in your plan. However if your mind is made up there is nothing they can do to stop you. You do not have to give any notice. You can cancel immediately and there will be no financial penalties.

It is not wise to cancel your DMP until your IVA has been accepted and is in place. Keep making your payments to avoid the possibility of re-starting collections actions.

What are the potential downsides to stopping a DMP and doing an IVA?

Stopping your debt management plan and starting an IVA is not for everyone. There are some things you need to consider before making your decision.

An IVA is less flexible than a DMP. Normally you have to include all your unsecured debt and pay in all of your surplus income each month. In addition, there is an annual review of your income every year. If you can afford to pay more, your payments have to go up.

If you receive a windfall such as inheritance or a compensation payment during an IVA, this has to be paid into the Arrangement. You can’t decide to keep the money and use it for something else.

Home owner’s get legal protection from creditors. However you may also have to release equity from your property as part of the agreement to repay more to your creditors.

Get advice for us before deciding to cancel your DMP and start an IVA. Call 0800 044 5407 or complete the form below.

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Does a DMP protect my house from a charging order https://debtmanagementforyou.com/articles/will-i-get-a-charging-order-if-i-start-a-debt-management-plan/ https://debtmanagementforyou.com/articles/will-i-get-a-charging-order-if-i-start-a-debt-management-plan/#comments Mon, 21 Sep 2020 16:51:21 +0000 http://debtmanagementforyou.com/?p=485 What is a Charging Order? Is a Charging Order against your home likely if you use a Debt Management Plan? How can you get legal protection for your home?

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If you are a home owner you may be considering a Debt Management Plan (DMP) because it is informal. As such you will not be forced to release equity from your property. However one of the disadvantages of this debt solution is that it does not give you or your property any legally protection. This means that your creditors can still take enforcement action against you to collect their debt. This could include applying for a Charging Order against your property.

What is a Charging Order?

A Charging Order affectively changes an unsecured debt such as a credit card or personal loan balance into a secured debt against a property you own. If at the time you come to sell your home the debt is still outstanding it must be paid in full from any equity available before you receive the balance.

Once a Charging Order is issued the creditor cannot then force the sale of your home. As such you can continue to pay off the debt. A good way of doing this is to still include it in your Debt Management Plan. However the creditor knows that they have the added protection that if you sell your home the outstanding debt will be paid in full.

DM4U Tip: Any creditor who has a Charge against your property cannot influence your decision about when or if you sell. The only way they can do this is to return to the court and apply for an Order for Sale. However the Court is unlikely to grant this if the property is your home.

Are you likely to get a Charging Order if you start a Debt Management Plan?

Although it does not offer you any legal protection starting a Debt Management Plan should significantly reduce the risk of getting Charging Order. As long as your creditors agree to your reduced payments it is likely that they will suspend any further enforcement action against you.

Before any of your creditors can apply for a Charging Order they must first apply for a County Court Judgment (CCJ). It is unlikely that they will do this if you are making regular payments into your Plan which they have accepted.

DM4U Tip: Starting a Debt Management Plan does not guarantee that your creditors will suspend their enforcement action. If any of them does not accept your payment proposal they could still act. If you feel that your creditors are continuing to act aggressively and you are worried that they might take further court action you should take advice and even consider using a different debt solution.

Can you include a charging order debt in a DMP?

Government figures show that the number of charging orders awarded has fallen in the last three years. However, in the first three months of 2011 there were still around 24,000 Charging Orders granted by the courts. This equates to nearly 100,000 Charges that will be granted this year.

The only way you can be sure that interest and charges will be frozen and that no further legal action will be taken against you or your home is by using an alternative solution. As a home owner the option that you should consider is an Individual Voluntary Arrangement (IVA). However you must understand that you may be required to release equity as part of this agreement.

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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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CCJ Debts and a Debt Management Plan https://debtmanagementforyou.com/articles/can-a-ccj-be-included-in-a-debt-management-plan/ https://debtmanagementforyou.com/articles/can-a-ccj-be-included-in-a-debt-management-plan/#respond Fri, 24 Jan 2020 18:37:00 +0000 http://debtmanagementforyou.com/?p=526 Can you stop paying a CCJ after starting a DMP? How to add a CCJ to a debt management plan? Does a DMP protect you from getting a Judgment?

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A debt management plan can’t overturn a CCJ. It may be possible to include the Judgment in your Plan. However a specific process will need to be followed.

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Can you stop paying a CCJ after starting a DMP?

A debt management plan (DMP) does not automatically protect you from a CCJ (County Court Judgment). The Judgment is a formal legal agreement requiring you to make Court approved payments towards a debt.

As such, you cannot just add this debt to your Plan and stop the required payments. If you do, the associated creditor is within their rights to take further legal action against you.

Such legal action could take the form of an application for an attachment of earnings against your wages. Alternatively, if you are a homeowner it could mean an application for a charge against your property.

Adding a CCJ to a debt management plan is not as simple as with other debts. Stopping payments without prior agreement could lead to further legal action.

How to add a County Court Judgment to a debt management plan

The first step to adding a CCJ to your debt management plan is to speak to the associated creditor. After considering your financial position and understanding that you want to treat all your creditors equally, they might simply accept the reduced payment terms.

If they refuse to accept, you will have to make a formal application to the court for your payments to be reduced (using form N245). If the Court agrees, you will be issued with an instalment order allowing you to reduce the payments to fit within your DMP.

Rather than making a formal application to change the payments, an alternatively option might be to simply leave the Judgement out of your Plan. You carry on making the required payments as normal.

To do this you must include the funds required to pay the Judgment in your living expenses budget.

The issue with leaving a CCJ out of your DMP is that the amount left to pay your remaining creditors may be to small for the Plan to be viable.

Does a debt management plan protect you from getting a CCJ?

A Debt Management Plan is an informal debt solution. As such it does not offer any legal protection from your creditors. Even if they agree to the reduced payments, any of them could still apply for a CCJ against you at any time.

If this happens you will receive a CCJ Admission form (N9A) through the post. You (or the debt management company you are working with) need to complete this carefully.

Returning the completed N9A will ensure the court is aware of your financial position and the fact you are already in a DMP. They should then take this into account when deciding on how much you can afford to pay towards the debt.

If you want to ensure your creditors can’t take legal action against you or your home, a DMP may not be right for you. You will need to consider a more formal debt solution such as an IVA.

Want more advice about starting a DMP? Give us a call (0800 044 5407) or complete the form below and we’ll call you.

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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/#comments 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/#comments 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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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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