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. Fri, 01 Jul 2022 17:24:13 +0000 en-US hourly 1 Tax credits debt and a debt management plan https://debtmanagementforyou.com/articles/tax-credits-debt-and-a-debt-management-plan/ https://debtmanagementforyou.com/articles/tax-credits-debt-and-a-debt-management-plan/#respond Fri, 01 Jul 2022 17:19:22 +0000 https://debtmanagementforyou.com/?p=6159 Can you include tax credits overpayments in a DMP? Should you make a separate agreement to pay these debts? Alternative options to consider.

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It is difficult to include tax credits overpayments in a debt management plan. It is usually better to agree a separate payment agreement with HMRC if possible.

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Can you include tax credits overpayments in a debt management plan?

It is not normally possible to include tax credits debt in a debt management plan (DMP).

The main issue is that the Plan is not a legally binding agreement. Because of this, HMRC are allowed to continue taking enforcement action against you if they refuse the payment offer being made.

They will often refuse because they require the money you owe to be repaid within a maximum of 12-18 months. Generally speaking, these timescales are not realistic if you are using a debt management plan because it will usually last much longer than 18 months.

Where you are still eligible to receive tax credits, a DMP is even less likely to be accepted. This is because HMRC can simply reduce the ongoing benefits you receive to recover the overpayment.

Should you make a separate agreement to pay these debts?

Given the difficulties with including tax credits debt in a debt management plan, the best option is to exclude it.

You should first look to set up a separate agreement directly with HMRC. This will ensure you offer to repay what you owe in timescales they are happy with. You can then implement a DMP with your remaining creditors.

You can include the HMRC repayment as an expenditure item in your living expenses budget. Your other creditors will accept this as it is seen as a priority debt.

Of course, the main problem with negotiating a separate agreement with HMRC is whether or not you will then have sufficient funds left over to start a DMP to pay your other debts. Remember, you will normally need a minimum of £100/mth to set up a Plan.

Once the tax credits debt has been paid you can then increase your DMP payments. This will ensure the rest of your debt is repaid faster.

Alternative options for repaying tax credits debt

Negotiating a separate repayment plan to manage your tax credits debt is all well and good. But what if this leaves you with no surplus income left for a debt management plan with your other creditors?

A DMP is unlikely to be suitable for you in these circumstances. You should therefore think about using a more formal debt solution such as an IVA or bankruptcy.

If you are a home owner, it is likely the best option for you will be an IVA. You can include tax credit debt in an IVA. This solution also ensures that your home is protected.

Where you live in rented accommodation, you may be better off going bankrupt which would mean you would not have to make any further payments towards your debts if you could not afford to do so.

Need help with tax credits debt? Give us a call (0800 044 5407) or complete the form below. The advice is free and confidential.

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Do you have to open a new bank account if you start a DMP https://debtmanagementforyou.com/articles/do-you-have-to-open-a-new-bank-account-if-you-start-a-dmp/ https://debtmanagementforyou.com/articles/do-you-have-to-open-a-new-bank-account-if-you-start-a-dmp/#comments Thu, 30 Jun 2022 16:20:54 +0000 https://debtmanagementforyou.com/?p=6149 Can you keep using your old bank account? What type of account should you open if you need to? Can you use your partners account?

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You are allowed to have a bank account if you are in a debt management plan. However, you will usually have to open a new account if you owe money to your bank.

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Can you keep using your old bank account if you start a Debt Management Plan?

When you start a debt management plan (DMP), you will need to think about your bank account.

Whether or not you can keep using it depends on whether you include any debt you owe the bank in the Plan. If you do, you will normally have to stop using the account.

The reason for this is the banking set off rule. Once your DMP starts, it allows the bank to simply take money from your account without your permission and pay debt in the Plan which is owed to them.

Clearly this can’t be allowed to happen as it would leave you short of cash. The only way to avoid it is to stop using the account and open a new one.

If your bank is not included in your DMP, you should be able to continue to use your account as normal. The set off rule only applies if debt owed to your bank is included.

What type of account should you open if you need to?

If you need to open a new bank account, your options will depend on the current state if your credit rating.

If your credit rating is still good you can open a normal current account. However, if it is already poor, you will need to apply for a basic account. Basic bank accounts are available for people with poor credit ratings.

Most banks offer basic bank accounts for free. You will all the facilities you need such as a debt card and internet banking. However you just won’t be able to apply for any form of credit such as an overdraft or credit card.

When choosing which bank to go to for your basic account, really the only rule is try and avoid any that are members of the same group. It is possible that banks within the same group could apply the set off rule. So if you owe money to Lloyds you should avoid opening your new bank account with Halifax or Bank of Scotland as they are all in the same group.

Some basic accounts which are easy to open on line include the Co-Op Cash Minder account. Also the standard account provided by Monzo and Starling.

Can you use your partners account?

You don’t have to have your own bank account to start a debt management plan. Instead of opening a new one of your own, you can use your partner’s account.

If you are already using their account you can continue to do so.

You just need to update the account details with your employer and any other organisation that pays you money. Given you give your authority for your money to be paid there, it will not matter to them who’s name the account is in.

Where your account is in joint names with your partner, you can continue to use this as long as you are not including other debts you owe to the same bank in your DMP. If you are, you will need to take your name off the account.

Need more advice about starting a debt management plan? Call us (0800 044 5407) or complete the form below. Its free and confidential.

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What if you get inheritance during a debt management plan https://debtmanagementforyou.com/articles/what-if-you-get-inheritance-during-a-debt-management-plan/ https://debtmanagementforyou.com/articles/what-if-you-get-inheritance-during-a-debt-management-plan/#respond Thu, 30 Jun 2022 14:12:38 +0000 https://debtmanagementforyou.com/?p=6132 Can you keep inheritance received during a debt management plan? Could you pay off your Plan early? Can you settle some debts and not others?

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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.

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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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Can you put a payday loan in a debt management plan https://debtmanagementforyou.com/articles/can-you-put-a-payday-loan-in-a-debt-management-plan/ https://debtmanagementforyou.com/articles/can-you-put-a-payday-loan-in-a-debt-management-plan/#comments Fri, 13 May 2022 17:08:51 +0000 https://debtmanagementforyou.com/?p=5918 It is possible to include a payday loan in a debt management plan. Will the loan company reject? Could you leave the debt out of your Plan?

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A payday loan can be included in a debt management plan. The loan is unsecured and so can be treated in the same as any other bank loans you owe.

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Including a payday loan in your debt management plan

Payday loans (also known as short term loans) are slightly different to other types of bank loans. They normally have to be paid back over a fairly short time (usually between 3-6 months). As a result, the amount you repay each month is relatively high.

Nevertheless, they are still unsecured debts. As such they can be included in a debt management plan (DMP) in the same way as any other loan you might have borrowed from your bank.

As long as your total debt (including any payday loans) is not to high and you can pay off the Plan in a reasonable amount of time, it can be an ideal way of getting back in control of these debts.

Once your Plan starts, you will need to cancel your payment with the loan company. If it is taken directly from your debit card, you may need to cancel the card by reporting it stolen to ensure no further payments are taken.

Will the payday loan company reject your Plan?

As with any of your creditors, a payday loan company has the right to reject your debt management plan. However, as long as you are offering to pay as much as you can afford, they will normally accept.

The amount you pay is determined by your disposable income. This is the amount left over from your total monthly income after all your reasonable living expenses are taken into account.

Your creditors will review your living expenses budget to decide whether the figures you have used for the calculation are reasonable for your circumstances. They will only normally reject the proposal if they feel your expenses are unreasonable and believe your payments could be higher.

If a payday lender were to reject your Plan, it can still continue and they still receive payments. Its just they are more likely to continue adding interest and use enforcement action. If this were to happen, you may need to review whether continuing to use a DMP is still the right option.

Could you leave the loan out of your Plan?

You can leave any of your debts out of your debt management plan and continue paying them as normal. However, it’s not usually a good idea, particularly with a payday loan.

The problem is that to prevent enforcement action, the monthly payment still has to be paid. But this is likely to be difficult due to the amount required.

Trying to continue paying these debts is likely to mean you can’t afford to set up a Plan for the rest of your creditors.

Ultimately there is no real benefit to leaving your payday loans out of your debt management plan. You don’t need to worry about being accused of fraud.

Given you took the loan in good faith with full intention of repaying it, the fact you now can’t afford to repay it is not fraud. It is simply a poor reflection on the lenders creditworthiness checking.

Need more advice about your payday loan and starting a debt management plan? Give us a call (0800 044 5407) or complete the form below. It’s free and confidential.

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Council tax debt and a debt management plan https://debtmanagementforyou.com/articles/council-tax-debt-and-a-debt-management-plan/ https://debtmanagementforyou.com/articles/council-tax-debt-and-a-debt-management-plan/#respond Wed, 11 May 2022 17:06:28 +0000 https://debtmanagementforyou.com/?p=5865 Can council tax be included in a DMP? Alternative solutions for council tax debt. Will you be evicted from your council house?

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It is not usually possible to include council tax arrears in a debt management plan. A separate payment plan will need to be set up to cover this debt.

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Can council tax be included in a debt management plan?

Local councils will not normally agree to council tax arrears being included in a Debt Management Plan (DMP).

An offer to include this type of debt in your Plan will normally be rejected. The reason for this is the council will argue it will take too long to repay the amount your owe them.

The only time it is possible to include this type of debt is if the arrears are from a previous property and you are now living on an area run by a different council.

Could a debt management plan still help?

A debt management plan could still help with repaying council tax debt if you have other unsecured debts like credit or store cards and loans.

You could reduce the payments you make to all these debts by putting them into a Plan. This may then free up sufficient funds to allow you to set up an addition repayment plan direct with the council to pay off your arrears within a reasonable time.

This solution will work as long as you have sufficient funds to agree a payment to the council and at least the minimum acceptable payment into your DMP.

You also need to ensure you have enough money to pay your ongoing living expenses including any ongoing council payments.

Alternative solutions for council tax debt

If you can’t afford to pay both your council tax arrears plus a minimum debt management payment, the solution described above won’t work for you. In these circumstances there are different options available which do not require you to set up a separate payment plan with the council.

The first of these is an IVA. Council tax arrears are included in an IVA. You offer to pay back as much of your debt as you can over a fixed period (usually 5-6 years).

If you’re not a home owner and living in rented accommodation, you should also consider going bankrupt. Despite what you may think, in theses circumstances, bankruptcy can be an ideal solution.

All council tax and any other unsecured debt you owe would be written off. In addition, you don’t have to make any further monthly payments towards any of your unsecured debts if you can’t afford to.

A Debt Relief Order will give the same benefits as going bankrupt and is cheaper to implement. However, this option isn’t suitable for everyone because you have to meet strict acceptance criteria.

Will you be evicted from your council house?

Falling behind with your council tax will not affect your council house. You will not be at risk of eviction unless you get into significant rent arrears.

That said, you can’t just ignore the debt. If you don’t sort it out, the problem can get very serious. The Council could ultimately instruct a bailiff to visit your property which could put your car and other possessions at risk.

Using a debt management plan to reduce your other debt payments may free up the funds you need to agree repayment with the council.

Struggling with council tax debt? For free confidential advice, call us (0800 044 5407) or complete the form below.

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What if my income falls while in a debt management plan https://debtmanagementforyou.com/articles/what-if-my-income-falls-while-in-a-debt-management-plan/ https://debtmanagementforyou.com/articles/what-if-my-income-falls-while-in-a-debt-management-plan/#respond Tue, 26 Apr 2022 13:34:17 +0000 https://debtmanagementforyou.com/?p=5760 Can you reduce your debt management payments if your income falls? What if the reduction is temporary? What if you can't make any payments?

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Your income could fall during your debt management plan. If so, you may struggle to keep up with the payments. Your options will depend on whether the fall is permanent and how much you can still afford to pay.

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If your income falls can you reduce your debt management payments?

A debt management plan (DMP) is a flexible solution. If your income has gone down, it is possible to reduce your monthly payments.

That said, in order for the Plan to continue, you still need to be able to pay a reasonable amount each month. Most debt management companies will require a monthly payment of at least £100.

It might be possible to reduce your payment amount below £100 but this will depend on the amount you owe and the number of debts you have.

You can’t just make a decision to pay less without communication with your creditors.

First, you will need to speak to your debt management company. They have to prepare a new income and expenses budget and send this to your creditors with a revised payment proposal. This should be acceptable as long as the new payment is still reasonable.

An increase in your living expenses may also mean you need to reduce your DMP payment. This situation can be treated in the same way as a fall in your income.

What if your fall in income is only temporary?

The reduction in your income may only be temporary. Perhaps you need to take time off work due to illness or for other reasons. You may be used to regular overtime which becomes temporarily limited.

Whatever the reason, in these circumstances there are two options you can consider. The right one depends on how long it will take for your income to increase again.

Where the fall is likely to be prolonged, the best option is normally to agree a reduction in your monthly payments. You can increase them again as soon as the situation improves, but you are not under any time pressure.

On the other hand, if you know the situation will only last a short time (say a couple of months), it might be simplest to ask for a payment break. This allows you to suspend your Plan payments altogether until your income improves again.

Inform your debt management company before taking a payment break. They should be able to agree this with your creditors without the risk of restarting collection and enforcement action.

What can you do if you can’t make any payments at all?

Your income may have fallen so much that you are no longer able to make any further debt management plan payments at all. Where this happens, your options will depend on how much you still owe and your wider financial situation.

First, consider whether you can offer a lump sum to settle. If the balance of your debt can be paid in a single cash sum, most if not all of your creditors could accept 50% of what they are still owed. They would then write the rest off.

You may have sufficient funds available yourself. Perhaps from savings or a redundancy payment. If not, they could also come from a third party.

Where funds to settle with a lump sum aren’t available, you should consider the options of either a Debt Relief Order or bankruptcy.

Neither of these solutions require you to make any monthly payments. Your remaining debt is simply written off. However, they are not suitable for everybody. You should call us for advice before making any decision.

Struggling to pay your debt management plan? For free, confidential advice about your options call us (0800 044 5407) or complete the form below.

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How long does it take to get a debt management plan https://debtmanagementforyou.com/articles/how-long-does-it-take-to-get-a-debt-management-plan/ https://debtmanagementforyou.com/articles/how-long-does-it-take-to-get-a-debt-management-plan/#respond Mon, 25 Apr 2022 13:56:16 +0000 https://debtmanagementforyou.com/?p=5736 When can you reduce your debt payments? How long before your creditors stop chasing you? When will interest and charges be stopped?

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When you start a debt management plan, you reduce your debt payments almost immediately. However, it can take longer for debt collection action and interest charges to stop.

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When can you reduce your debt payments?

Before you can start a debt management plan (DMP), you need to work out what you can afford to pay towards your debts. This is known as your surplus (or disposable) income.

Surplus income is calculated by deducting your total living expenses from your total income. The amount left (the surplus) is what you pay into the Plan. It is split between all the debts you owe on a pro rata basis. In other words each gets a percentage of the surplus income based on the percentage of the total debt they are owed.

Once you have calculated the amount each of your debts will be paid, you can start making the reduced payments straight away. You do not have to wait for them to agree. In this way, a DMP gives immediate debt relief.

At the same time as reducing your payments, your payment proposal must be sent to each creditor for them to review. They should agree as long as they can see you are making your best effort to pay them as much as you can afford.

A DMP allows you to start making reduced debt payments immediately. It gets your finances back under control straight away.

How long before your creditors stop chasing you?

After you start a Debt Management Plan, it is quite normal for some (if not all) of your creditors to continue contacting you.

Even though the Plan allows you to reduce your payments straight away, your creditors will still need time to review and agree your payment proposal. They then have to update their systems. During this negotiation period, the collections departments will still be trying to contact you and demanding you make payments to them.

Payment demands and threats of further action often continue for 2-3 months from the date you make your first reduced payments.

If you continue to receive payment demands from any particular creditors, don’t avoid them. Speak to them and confirm that you (or your debt management company) have sent them a reduced payment proposal and you are now paying as much as you can afford.

A debt management plan can’t stop court action if it has already started. Enforcement actions such as applications for a CCJ or attachment of earnings are likely to continue.

When will interest and charges be stopped?

It is normal for creditors to continue adding interest and late payment charges after you start a debt management plan. As a rule of thumb, it will take 3 months for them to stop this action.

As long as the reduced payment amounts you have offered are reasonable, they should stop after this time. However, your Plan is not a legally binding agreement. They are not under any legal obligation to do this.

Any one of your creditors can continue to add interest to the balance you owe. They might do so if they feel you could and should be paying more. Some might simply have a policy of continuing to add interest even if a DMP is agreed and in place.

If you find that one or more of your creditors continues to add interest, there are some options. First, you can use any extra money you are able to earn to pay off or settle these accounts more quickly. Where this is not a feasible option, you might been to consider a different debt solution such as an IVA.

Thinking about starting a debt management plan? For free, confidential advice, give us a call (0800 044 5407) or complete the form below.

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What happens to my property in a debt management plan https://debtmanagementforyou.com/articles/what-happens-to-my-property-in-a-debt-management-plan/ https://debtmanagementforyou.com/articles/what-happens-to-my-property-in-a-debt-management-plan/#comments Thu, 14 Apr 2022 12:10:15 +0000 https://debtmanagementforyou.com/?p=5691 Do you have to sell or remortgage your property? Will your mortgage lender find out? Is your home at risk from a Charging Order?

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One of the advantages of a debt management plan is your property is not involved. You do not have to sell or remortgage your home. However in some circumstances, your home equity could be at risk.

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Do you have to sell or remortgage your property to pay your debt?

When you use a debt management plan, you are under no obligation to sell your property or release any equity from it to help repay your debt.

It does not matter how much equity you have. When you set up the Plan, you do not have to provide details about your home. For this reason, it can be a very good solution if you have significant equity which you don’t want to touch.

That said, you could choose to release equity if you want. Doing so can be a very efficient way of paying your DMP off early.

You may only have to raise the equivalent of 50% of the debt you owe in the Plan. Very often the creditors will accept such a lump sum in full settlement. They then write off the remaining balance.

Your mortgage is a secured debt and as such, it can’t be included in a DMP. You must continue paying it as normal or your home will be at risk of repossession.

Will your mortgage lender find out about your Plan?

Your mortgage lender is not told that you have started a debt management plan (DMP).

As a secured debt, your mortgage is not included in the Plan. As long as you keep paying it as normal, it is very unlikely that your lender will find out.

The only time your DMP will affect your mortgage is if you have a mortgage deal which ends during the Plan. Because your credit rating is affected, it is unlikely you will get a new deal with the same lender (particularly if you are with a ‘high street lender’).

In itself, this is not an issue. At the end of your current mortgage deal, you will be allowed to move to your current lender’s standard variable rate (SVR). However, your monthly mortgage payments are likely to go up.

If your mortgage payments go up, you may be unable to afford your DMP payments. You might be able to reduce them but this will extend the length of the Plan.

Even if your mortgage lender does discover you are in a debt management plan, they are unlikely to have any concerns as long as you maintain your mortgage payments on time.

Is your home at risk from a Charging Order?

One of the disadvantages of a debt management plan is that it doesn’t offer any legal protection for your property. Despite the Plan being agreed and in place, your creditors can still take action to secure their debt against your home with a Charging Order.

As long as you maintain your agreed payments on time, most creditors will be unlikely to try and do this. But there is a risk that some could.

In particular creditors such as business loan companies and debt purchasing companies are known to favour Charges. If you owe money to these types of creditors, a DMP may not be the right solution for you.

Such creditors would first need to apply for a CCJ (County Court Judgment). But once that has been issued they can automatically apply for a Charge. If granted, this would secure their debt against your property.

If a Charge is ordered, it doesn’t mean the creditor can force you to sell. But they can start to add interest to the debt (normally 8% per year). In addition, if you ever decide to sell, the outstanding charge would have to be paid in full out of your equity.

Want free, confidential advice about your property and a debt management plan? Give us a call (0800 044 5407) or complete the form below.

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Options if you earn overtime during a debt management plan https://debtmanagementforyou.com/articles/options-if-you-earn-overtime-during-a-debt-management-plan/ https://debtmanagementforyou.com/articles/options-if-you-earn-overtime-during-a-debt-management-plan/#respond Wed, 13 Apr 2022 12:50:22 +0000 https://debtmanagementforyou.com/?p=5648 Do you have to pay overtime money into your Plan? Can you increase payments to just one creditor? Can you save the extra money?

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When you do overtime during a debt management plan, you can decide what to do with the extra money you earn. You could use it to pay off your debt faster. But you don’t have to.

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Do you have to pay overtime money into your Plan?

Flexibility is one of the main advantages of a debt management plan (DMP). If you have extra funds, you do not have to increase your payments.

This means any overtime money you earn is yours to keep. You can decide what you will do with it. You could save it or spend it. No-one can force you to pay any of it to your Plan.

That said, it is in your interest to increase the amount you pay in if you can. The arrangement will last until your debts are paid off. As a result, the more you pay each month, the sooner it will be finished and you will be debt free.

Nevertheless, the Plan’s flexibility means you can be be smart about when and how to pay more. Focusing extra payments on a single creditor or saving to enable cash lump sum settlements can mean your debts will be paid much more quickly.

You are not obliged to pay any overtime you earn into your debt management plan. You decide what to do with the money.

Can you increase what you pay to a single creditor?

Earning overtime during a debt management plan will give you extra cash. You can use this to increase the payments to just of of the debts in your Plan if you like. As a result, this account will be repaid faster than the others.

Why would you want to do this? One reason is perhaps they are being more difficult. They may be continuing to add interest or threaten further enforcement action. Another, is sometimes it just makes sense to reduce the number of creditors you are dealing with.

Once one creditor is paid off, those remaining will also be paid faster because they will get a larger share of your ongoing monthly payment. You can then focus on paying off the next and so on.

This process is commonly referred to a snowballing. As each creditor is paid, it has the affect of paying your overall debt faster and faster in the same was as a snowball gathers speed as it rolls down a hill

Some debt management companies say you can’t use extra money you get from overtime or elsewhere to pay off one debt before the others. This is not true. The flexibility of your DMP means a preferential payment like this is possible.

Can you save your overtime money?

You can choose to save any extra money you earn from overtime. Saving is allowed in a debt management plan. In fact it is very sensible.

Having money put aside gives you something to fall back on in an emergency. For example if you have to pay for an unexpected car repair or have to replace something like your washing machine.

On top of this, if you are able to save a lump sum, it can be used to settle one or more of your debts.

After you have been in a DMP for 6 months or so, many (if not all) of your creditors will be open to settlement offers. Very often they will take as little as 50% of the balance to settle, writing the rest off. It therefore makes good sense to save overtime money for this purpose.

You don’t have to save enough to settle all the debts in your Plan at once. You can focus on one at a time. Once that one is settled, you can move on to the next. Using this strategy will mean you will be debt free much faster.

Need more advice about a debt management plan? Call us (0800 044 5407) or complete the form below. The advice is free and confidential.

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Unhappy with my IVA can I change to debt management plan https://debtmanagementforyou.com/articles/unhappy-with-my-iva-can-i-change-to-debt-management-plan/ https://debtmanagementforyou.com/articles/unhappy-with-my-iva-can-i-change-to-debt-management-plan/#comments Mon, 04 Apr 2022 10:56:41 +0000 https://debtmanagementforyou.com/?p=5596 Can you switch from and IVA to debt management plan if unhappy? How long will it take to pay your debt? How is your credit rating affected?

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Have your IVA payments gone up by an unreasonable amount? Perhaps you have other issues with the Arrangement. If you are unhappy, you can cancel and start a debt management plan if you want.

Included in this article:

Rather speak to a person? Call 0800 044 5407 or fill in the form below and we’ll call you – Its free and confidential

Can you switch from an IVA to a DMP if you are unhappy?

You might be surprised to learn that you can stop your IVA and start a debt management plan at any time.

Even though you signed the agreement, an IVA is only really legally binding on your creditors. They can’t break the terms and start chasing you for money again. However, if you are unhappy, you can cancel and instruct your IVA company to terminate it.

Once the agreement is terminated, you are then allowed start a debt management plan (DMP) to pay off your debts.

You can’t get back the money you already paid into the IVA. Your IVA company will deduct their fees from these funds with anything left going to your creditors. Because fees are deducted, your debts may not go down that much.

You stop your IVA by cancelling your monthly payments. Your IVA company can’t charge you any more than you have already paid in.

Why change to a debt management plan?

There are some good reasons why you might want to switch from your IVA to a debt management plan.

The first is where your income has increased, your IVA payments have gone up and now you will be paying more into the Arrangement that you originally owed. Clearly you would be unhappy about this.

In these circumstances it is often much cheaper to cancel and just pay off the balance of what you owe using a DMP.

Another reason you would want to switch is if you learn that you are going to receive a windfall before the end of your IVA. This money would have to be paid in to the Arrangement. You have no control. If you cancel and start a DMP, you can decide what to do with any windfall you then receive.

If you receive a large windfall during an IVA, you could easily end up paying more back than you originally owed.

How long will it take to pay your debt if you switch to a DMP?

Before you cancel your IVA and start a debt management plan, you should calculate how long it is going to take you to pay off your debt.

This will depend entirely on how much you still owe and how much you will be paying into the Plan each month.

To find out, simply divide the total debt you still have remaining by the monthly payment you will make. Then divide the answer by 12 to get a total in years.

If you are in line to receive a windfall, you should also factor in the option of settling your debt in full once this is received. By doing this, you might be able to write off up to 50% of what you owe.

The total debt you owed when you started the IVA may not have gone down that much. So, it is normally best to base your calculation on the original debt you owed at the start of your IVA.

What happens to your credit rating if you stop your IVA?

Stopping your IVA will won’t mean your credit rating suddenly gets better.

The record that you started the Arrangement stays on your credit file for the full 6 years. This is regardless of whether you have cancelled it or not.

That said, starting a debt management plan is not going to make it any worse.

As soon as you have paid off your remaining debt, your credit rating has the opportunity to start improving. So as long as you do this before the record of your old IVA comes off your file, there will be no difference.

Once your DMP is completed and your debts are paid or settled in full, you can speed up the recovery of your credit rating. Using a credit repair credit card in one of the best ways of doing this.

Unhappy with your IVA and thinking about cancelling? Give us a call (0800 044 5407) or complete the form below for free, confidential advice about your options.

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