If you and your partner or spouse are both struggling with debts it is possible to combine them into a joint Debt Management Plan.
In this article:
- What is a Joint Debt Management Plan?
- How much will the monthly payments be?
- Can you leave debts out of the Plan?
- What if you split up during the Plan
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What is a Joint Debt Management Plan?
It does not matter that you may both have different levels of income or debts. In addition it is not necessary to have any joint debts. All of your debts are simply combined into one group within a single Plan. The amount that you can both afford to pay is then shared between all of them.
A joint Plan gives the advantage of being able to make a single payment each month which covers all of your debts. We explain how you can start up the agreement.
How are the Monthly Payments in a joint Debt Management Plan?
The amount that you will have to pay into your joint DMP each month is known as your Disposable Income. This is calculated by deducting your reasonable living expenses from your monthly income after tax.
If you are planning on starting a joint Plan you will normally base your disposable income calculation on your total household income less your total household living expenses. This will enable you to work out the maximum that you can pay towards your debts as a couple each month.
If you and your partner are used to keeping your finances totally separate it is still possible to carry out a joint DMP. The easiest way to do this is for each of you to calculate your individual disposable income. You can then combine these two figures into one monthly payment towards all of your debts as a group.
The downside to this is that if one of you has a much larger disposable income than the other they will be contributing more to the repayment of the debt as a whole.
Where this is the case you have two options. You can stick with a joint Plan or you could start two separate ones. If you start two separate plans the personal with the largest disposable income might be able to pay off their debt more quickly. Once this is done they could use their disposable income to help the other.
BMD Tip: Separate DMPs may only be possible if both of you have sufficient disposable income to make sensible monthly payments to your respective creditors. If not combining your payments into a single plan might be the best option.
Can you Leave Debts Out of a Joint Debt Management Plan?
If you need to for any reason it is possible to leave a debts out of a joint DMP and continue to maintain the repayments to these as normal.
Nevertheless this practice is generally not recommended. By keeping one creditor out and paying them normally it is likely that you will significantly reduce the amount you can pay into the Plan. This can make it much more difficult to negotiate with the remaining creditors.
They will be unhappy about the fact that one or more of your accounts is being treated preferentially and paid normally. As a result they may be less willing to help you by freezing their interest and late payment charges.
What if you Split Up during a Joint Debt Management Plan?
If you and your partner split up while you have a joint DMP this is normally not a significant problem. Because the Plan is an informal agreement it can be cancelled or changed at any time.
The Plan can be cancelled by simply stopping making your payments into it. There should be no cancellation fees for doing this. You can then start a new Plan with your own creditors based on your individual disposable income if you wish. Of course you would still have to include any joint debts in your plan as you both have joint responsibility to pay these.
The only problem with starting your own Plan is that it requires you to be able to afford the monthly payments yourself. If you have little or no income and your joint plan was being paid by your partner then this could cause an issue and you may have to review your options and consider a different debt solution.
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