Debts included in a Debt Management Plan
It is important to understand which debts can be included in a Debt Management Plan (DMP). If the money you owe cannot be included this solution might not be for you. Generally speaking you can include all of your unsecured debts. These are things like bank overdrafts, credit cards, personal loans, payday loans, catalogues and store cards.
Which debts cannot be included in a Debt Management Plan?
There are some debts that cannot normally be included in a Debt Management Plan. The most common are where a County Court Judgement (CCJ) has already been issued, debt you owe to HMRC and secured debts such as a mortgage or secured loan.
County Court Judgment (CCJ) debts
If a County Court Judgement (CCJ) has already been issued against one of your unsecured debts it will be difficult to include this in your DMP. You have two options as far as this type of debt is concerned. The first is to leave it out of your Plan altogether. However you must then make a provision in your living expenses budget to cover the amount you must pay towards the debt each month. If this is not possible because it means that you are left with little or no money to pay into your DMP you will need to apply to the court to reduce the amount you to pay towards the CCJ.
If you owe money to HMRC in the form of unpaid tax or VAT it is very unusual that you will be able to include this in your DMP. HMRC will normally require debt owed to them to be repaid within 12 months (sometimes they will agree 24 months). Given that your Plan is likely to last far longer than this it will normally not be acceptable to them.
You will normally have to make a provision to pay an amount in your living expenses budget which meets HMRC’s requirement. If you are unable to meet the payment demands of HMRC or doing so means that you have nothing left to pay into your Debt Management Plan you may have to consider an alternative debt solution.
Debts that are secured against property such as a mortgage, secured loan or car finance agreement cannot be included in a DMP. If you do not keep up the agreed payments towards these debts it is likely that the property they are secured against will be repossessed. When you are putting together your living expenses budget it is important that you provision sufficient amounts to maintain the payments towards all of your secured debts. If after doing this you have no disposable income left to pay into a DMP then you may have to consider a different debt solution.
DM4U Tip: If you are struggling to pay your mortgage a DMP may still be able to help. Using a Plan to reduce the payments you have to make towards your unsecured debts might free up sufficient funds to enable you to pay your mortgage on time.
Can you choose to exclude debts from a Debt Management Plan?
It is always advisable to include all of your unsecured debts if you start a Debt Management Plan. This way your creditors can see you are treating all of them equally and you will have a good chance of them all agreeing to the reduce payments.
However because a DMP is an informal agreement it is possible to leave one or more unsecured creditors out of the plan and continue to pay them normally. Of course you will need to make sure you provision sufficient funds in your living expenses to maintain the payments towards the excluded debt.
DM4U Tip: If you exclude a creditor without good reason and the others find out they may decide to reject your reduced payment proposals. They would do this on the basis that not all of your creditors are being treated equally. As a result they may refuse to stop adding interest and charges to your accounts which would seriously affect the length of the Plan. For this reason if you chose to leave any creditors out of your DMP the process needs to be managed very carefully.
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