Self Employed – Can you do a Debt Management Plan?

Self Employed – Can you do a Debt Management Plan?

It is possible to use a Debt Management Plan if you are self employed. However some of your debts might have to left out and paid seperately.

In this article:

  • Can you start a Debt Management Plan if Self Employed
  • Is it possible to include business debts?
  • Will you have to change your bank account?
  • What if you are a Company Director?

Want to start a DMP? Give us a call (0800 077 6180) or complete the form below to speak to one of our experts

Can you start a Debt Management Plan if you are Self Employed

You can start a plan

You are allowed ton continue running your business

It might affect you ability to get credit

If you want help you may need to speak to a specialist commecial provider

Can you Include Business Debts in the Plan?

If you are self employed or a sole trader and have used a credit card or overdraft to support your business then although they are technically business debts they can certainly be included in a DMP. However as a self employed person as well as consumer banking debt you may also owe money to your suppliers.

There is no reason you cannot included debts to suppliers in the arrangement but you must be prepared for the possibility that some may not be willing to accept reduced payments because they may be personally affected.

In addition if you include suppliers in your Plan they may refuse to continue to supply you with goods or services or may only do so in the future on a cash basis.  However if you believe that this might happen you might be able to leave this creditor out and continue to pay them normally.

If you are self employed and struggling with debt it is likely that you may owe money to HMRC such as tax or VAT arrears. If so then one of the problems with a DMP for you is that tax debts cannot be included.

Any tax or VAT debt that you have will normally need to be treated as a priority debt. A repayment plan would have to be negotiated separately with HMRC as they will want to see tax arrears paid in a matter of months rather than the years that it could take to pay your debt using a debt management plan.

If you cannot afford to pay your tax arrears in the time scales required by HMRC you need to think very carefully about your options as it is likely that they might threaten you with bankruptcy. A better solution for you in these circumstances might well be an Individual Voluntary Arrangement where both supplier and HMRC debt can be successfully included.

you could leave a debt out of the plan if you need some form of credit to continue managing your business.

Will you have to change your business bank account?

If you owe money to your bank it will normally be important for you to open a new bank account with a different bank before you can start a DMP.

This is because if you are trying to negotiate reduced payments with your bank but at the same time are still paying money into your bank account the bank has the right to take your funds without your agreement to settle your unpaid debt.

In addition if you have been using your bank overdraft it is highly likely that this facility will be withdrawn. As such moving to a new bank will mean that you can make a clean start and can pay off your old overdraft in a managed way.

BMD Tip: If you already have a poor credit rating many banks will be reluctant to offer you a new business account. If you find this is the case an alternative option is to open two new personal accounts in your name and use one for business transactions. This keeps your business and private banking separate and is fine as long as you are not planning to try and borrow from the new bank without letting them know it is for business purposes.

What if you are a Company Director?

Might be ideal as no one will find out

Arrange a call with a DMP Expert

Need help to start an Debt Management Plan?

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