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:
- Are you allowed to leave debt out of a DMP?
- Do any debts have to be left out?
- Can you use any credit during the plan?
- What happens to Joint Debts?
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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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