House and a Debt Management Plan
Your house should not be affected if you start a Debt Management Plan (DMP). However if you own your home there are some things you must consider.
- How will your house be affected by a DMP?
- Do you have to release equity?
- Is there a risk you will get a Charging Order?
- What is the affect of a DMP if you are renting?
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How will your House be affected by a DMP
If you own your house or flat it should not be affected if you start a Debt Management Plan. Your mortgage and any other debts secured against it are not included. You make these payments as normal and the mortgage lender is not told.
If you are struggling with your mortgage payments the Plan can actually help you get back in control. It allows you to reduce your unsecured debt payments. This releases cash to ensure to can always pay your mortgage on time.
The cash you need to pay your mortgage is included in your living expenses budget. This means it will be available each month. You can even included an amount in your budget to start repaying any mortgage arrears you have.
Your house is not blacklisted if you start a DMP. Your personal credit rating is negatively affected but not the property you live in.
Do you have to release Home Equity to pay your Debts?
If you start a DMP you are not under any legal obligation to release equity from your house to help repay your debt. This is often seen as an advantage of the solution.
If you have a significant amount of equity which you do not want to touch the Plan could be an ideal option for you.
Having said that one of the ways that you could significantly shorten the length of your Plan is to release equity by re-mortgaging. You could then use this cash to settle your debt.
Settling your debts with equity released from your property could significantly reduce the length of your DMP.
Is there a risk you will get a Charging Order?
You cannot be forced to release equity from your house if you start a DMP. However it might still be at risk if one of your creditors decides to apply for a Charging Order.
The Plan is not a legally binding solution. As such it does not give your property any legal protection from your creditors. If they wish they can still apply for a CCJ against you. Once this is in place they can then automatically apply for a Charging Order.
If a charging order is issued it secures the associated debt against your property. This can then only be lifted if the debt is paid in full or settled to the creditor’s satisfaction.
If you maintain your agreed DMP payments the risk of a Charging Order is low. However if any of your creditors refuse to accept your payment offer there is a risk they will take this action.
How will a DMP affect you if you are renting?
A Debt Management Plan will not cause you any problems if you are renting your house. Your landlord will not be told about the Plan. As long as you maintain your rent payments you will be able to remain in the property.
The Plan will help ensure that you pay your rent on time. These payments are included in your living expenses budget as part of your priority payments.
However moving to a new rented house during a DMP could be an issue. Your credit rating will be poor and so you are likely to fail any credit check carried out by a letting agent or potential landlord.
If you offer to pay rent in advance or have someone who will act as a guarantor on your behalf this may overcome the issue of your poor credit rating if you want to rent a new property.
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