If you are trying to find out if a Debt Management Plan is right for you, you will be pleased to know that most people with unsecured debt problems can use this solution. However this does not mean that it is automatically right for you.
There are a number of factors which you need to consider before making your decision. These include who you owe money to, how long the Plan is likely to last, whether or not your circumstances are likely to change in the future and how your home will be affected.
Whether or not a DMP is right will depend on how much debt you owe and to whom
There is no restriction on the amount of debt that can be included in a DMP. You could use one if you owe just a few hundred pounds or many tens of thousands. However the type of debts that you owe are a critical factor to consider.
Most unsecured debts such as credit cards, overdrafts, personal loans and payday loans can be included however there are some that must be excluded. These include tax debt owed to HMRC unless this can be repaid within 12 months as part of the Plan. In addition it is also difficult to add debts if the creditor has already issued a County Court Judgement (CCJ) against you.
Secured debts such as your mortgage cannot be included. However the Plan could still help you in the sense that it will reduce the payments that you have to make towards your other unsecured debts and so free up cash to enable you to pay your mortgage on time and catch up with any arrears.
Are you happy with the length of time your Debt Management Plan will last?
One of the things that you need to bare in mind if you are considering a DMP is that you still have to repay all of the your debts in full. The time it takes you to do this will depend on how much you are able to pay back each month. You therefore need to estimate the length of your plan before you start and decide whether you would be happy with this.
You can do this by taking the total amount of the debts you intend to include and dividing this by the monthly payments you will make. This will give you the repayment time in months which can then be divided again by 12 to give you the time in years.
BMD Tip: It is very important to recognise that your Plan will normally last longer than any estimated figure. This is because your creditors will almost certainly continue to interest and charges to your accounts but it is impossible to say how much and for how long they will do this.
Do you want help to start a DMP? Give us a call on 0800 077 6180 or complete the form below to speak to one of our experts
Find out if a Debt Management Plan is right for you
Whether a Debt Management Plan (DMP) is right for you depends on your circumstances. It is important to understand how long your DMP will last Is a DMP a good debt solution if you just need a breathing space? To find out more please visit: http://beatmydebt.com/debt-management-plan/find-out-if-debt-management-plan-is-right-for-you
Are your circumstances likely to change during your Plan?
If you have calculated that it will take many years to repay your debts using a DMP you may think that it is not the right solution for you. However before you make your decision you should consider whether or not your financial situation is likely to change in the future.
If you can afford to increase your payments during your Plan this will help you repay your debt faster and mean that the length of your plan is reduced. As such if you are due a wage increase or perhaps a lump sum from an inheritance or compensation payment which will then allow you to pay your debts faster or even settle them in full the solution might be ideal.
BMD Tip: If your income increases while you are in your Plan you are not legally obliged to increase the payments you make. You are allowed to use the extra money for other things or save it until you have enough to offer lump sum settlements to your creditors.
How will your home be affected by a Debt Management Plan?
If you are a home owner you you will not be required to release equity from your property to help repay your debt if you use a DMP. For this reason home owners often consider this solution as a way of protecting the equity in their property and keeping it separate from their debt problems.
However it is important to understand that the equity in your property could still be at risk because the Plan gives no legal protection for your property. This means that even if you are making your agreed payments on time there is nothing to stop them from applying to the court for a Charging Order against your property effectively reducing the equity in it.
BMD Tip: Once you start making regular and agreed payments into your Plan there is every reason to expect that no further legal action will be taken against your home. However there is no guarantee of this.
How will a Debt Management Plan affect your job?
Your job will almost certainly not be affected if you start a DMP. The reason for this is that it is a totally private agreement. Your employer will not be told and your name will not be recorded on any formal list or register. As such there is simply no way that your employer will be able to find out unless you tell them.
The solution can therefore be used by virtually anyone from any profession to deal with personal debt problems. This includes people such as company directors and other professionals such as accountants and solicitors.
BMD Tip: Your credit rating will be negatively affected by a DMP. As such if you are in the rare situation that your job requires you to maintain a clean credit record then it may still be at risk if you start this kind of arrangement.
Who will be told about my Debt Management Plan?
A Debt Management Plan is a discrete agreement with your creditors Who will be told? Is there a formal register? To find out more please visit: http://beatmydebt.com/debt-management-plan/find-out-if-debt-management-plan-is-right-for-you
What is your attitude towards paying back your debt?
When you are thinking about how to deal with your debts your primary concern may well be how to repay everything that you owe. This is a reasonable goal which could be met by using a DMP because you will be required to repay your debt in full.
However it is important to factor into your decision making that there are other solutions that may allow you to become debt free far faster because they will allow often a large portion of your debt to be written off.
As such if one of your primary considerations is to become debt free as soon as possible even if this means that you do not repay all of your debt then a DMP may not be the ideal choice for you. On the other hand if you do want to make every effort to repay everything that you owe then you may feel more comfortable to use this solution.
Other Debt Solutions might be suitable for you
A DMP is not the only debt solution which might be suitable to resolve your debt problem. Before making your final decision to apply for a DMP you should also consider the other available debt solution options.
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