Money Advice, Debt Advice & Debt Help
Can you Leave Debt Out of a Debt Management Plan?
Money Advice, Debt Advice & Debt Help

Can you Leave Debt Out of a Debt Management Plan?

Can you Leave Debt Out of a Debt Management Plan?

It is possible to leave debt out of a Debt Management Plan. However it is not normally recommended unless you have a good reason for doing so.

In this article:

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Can I keep debts out of my Debt Management Plan?

It is possible to leave debts out of your Debt Management Plan (DMP). Can you keep using credit while your DMP is running? What are the problems with leaving debts out of your Plan? To find out more please visit: http://beatmydebt.com/debt-management-plan-frequently-asked-questions/which-debts-can-be-included-in-a-dmp

Are you allowed to leave debt out of a Debt Management Plan?

A Debt Management Plan (DMP) is an informal agreement with your creditors. As such there is no legal reason why you have to include all of your debts. You can leave one or more out if you want and continue paying it as normal.

Having said that if you do the ones which are are included might not then accept the Plan. They may feel your reduced payment offer is unreasonable as you are not treating everyone you ow money to in the same way.

If this were to happen you could start the Plan without their agreement. However in these circumstances they may continue to add interest and charges to your accounts and even take further enforcement action against you.

You do not have to tell your other creditors you are leaving a debt out. However then you would not be able to include an amount paying that debt in your living expenses budget.

Do any debts have to be Left Out?

Some debts have to be left out of a debt management plan. These are mainly secured debts such as a mortgage or car finance agreement. They will need to be paid as normal. However there also some unsecured debts that can’t be included.

If you have tax arrears or other debt with HMRC you will normally have to make a separate arrangement to pay these. HMRC will not agree to money owed to them being included in a DMP as they will require it to be repaid within 12-18 months.

CCJ debts are also difficult to include. If you do not maintain the payment already ordered by the Court the creditor could take further enforcement action against you.

Where you owe money to HMRC or have CCJs a DMP is unlikely to be suitable. Give us a call (0800 077 6180) to discuss the alternative options.

Can you use credit during a Debt Management Plan?

Certain types of credit can be used as normal during a debt management plan. These include utility bills such as gas and electricity which are paid on a monthly basis.

In addition you will be able to keep your pay monthly mobile phone contract. The only time you might experience an issue with a mobile phone is if you want to take out a new contract with a new supplier. They will carry out a credit check against you which you may fail and are therefore likely to refuse your application.

If you are self employed you may need to maintain a line of credit to run your business. Perhaps you need a credit card or an account with a key supplier. In these circumstances you should be able to keep these debts out of your DMP and continue paying for them as normal.

Some lenders (particularly payday loans companies) may still be prepared to lend to you while you are in a DMP. However, borrowing more during your Plan should be avoided if at all possible.

What Happens to Joint Debts in a Debt Management Plan?

If you have a debt in joint names with someone else you have to think carefully about how they will be affected by a Debt Management Plan. If only you start the Plan they will remain liable for the debt.

One way round this is to start a joint DMP. You both include all your debts in the plan and base the monthly payments on your household disposable income.

Alternatively you might consider leaving the debt out. However this would only work if your partner can afford to maintain the required monthly repayments from their income.

A joint debt can be left out of your Debt Management Plan. However this will only work if the other account holder can keep up the repayments.

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4 thoughts on “Can you Leave Debt Out of a Debt Management Plan?

  1. Jilly says:

    Hello.

    I am having a DMP review and wish to leave out my credit card with my bank as I don’t want to involve them in it. When I set the plan up four years ago this was okay, but now I’m being told by my company (The Pentagon Group) it may not be possible.

    Can you advise?

    1. Hi Jilly

      As highlighted in the article above there is no legal reason you have to include all your creditors in your debt management plan (although generally it is sensible to do so).

      The reason your provider may now be concerned where they were not before is that the regulation surrounding the management of DMPs has increased significantly in the last 4 years. Now they have to be able to prove that what you are doing is in your best interest.

      Having said that if you have a good reason for wanting to leave the debt out then Pentagon should still be able to accept this. They really just need to put a note on your file confirming the negatives of doing so have been discussed and you are aware of them and decided to go ahead anyway.

      You should suggest this to them. If they absolutely won’t help then you could always change to a different debt management provider. Alternatively take over the management of the plan yourself.

  2. Ben says:

    Hello. I took a loan out within the last few weeks. Since doing so I have realised that I can’t afford to repay all my creditors their full amounts each month. I contacted step change who advised a DMP.

    When I informed my lender of this they sent me an email basically suggesting I obtained the loan fraudulently and that I will have to continue with the agreed terms. Step change won’t allow me to not include this debt in their DMP but I really don’t want to include it and risk legal action. What can I do?

    1. Hi James

      Generally speaking if you take a new loan and then almost immediately try to include it in a DMP the creditor will refuse. You can understand where they are coming from. As far as they are concerned you should have known that you were struggling and a DMP was on the cards and so you should not have borrowed more from them. You are probably going to have to make 6 months or so of payments to them before they agree to any reduction.

      In the mean time despite what you have been told you can start a plan with your remaining creditors if you wish. You are right Step Change will not help you with this because they say you have to include all your creditors. However this is simply their internal policy. Legally speaking you do not have to. As long as the reasons for what you are doing are made clear your other creditors should be OK with it as long as you can still make a reasonable monthly payment into the plan.

      Given Step Change won’t help you will either need to set up the Plan yourself or use a commercial company who will charge a fee. Please give us a call if you want to discuss your options (0800 077 6180).

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