If you are thinking about starting a Debt Management Plan (DMP) you need to be clear about what debts you can include.

Included in this article:

• What debts can be included in a debt management plan?
• Which debts can not be included?
• Can you choose to leave any of your debt out of the Plan?
• Is there a minimum debt amount you have to include?

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

What debts can be included in a debt management plan?

You can include most unsecured debts in a debt management plan (DMP). Common examples are things like a bank overdraft, credit cards, catalogues and loans.

Short term lending debts such as a payday loan can also be included in this solution.

In addition, if you are self employed, you can put in your business overdraft, credit card, trade credit account and even a bounce back loan.

Debt that you have built up on credit cards or bank loans because of gambling can also be added to the Plan. However you will normally need to prove you have stopped gambling by showing no expenditure of this type on bank statements or credit cards for the past 3 months.

Which debts can’t you include?

Secured debt such as a mortgage or car finance agreement can be included. That is unless the property or vehicle has already been repossessed (or you are happy for it to be so) and you are dealing with a shortfall debt.

There are also some unsecured debts which can’t be included.

Generally speaking you will not be able to include rent arrears unless these are from a previous property. The same goes for utility and council tax arrears or debt owed to HMRC.

If you have any of these types of debts, you will normally have to set up a separate payment agreement directly with them. If you can’t afford to pay both this and a reasonable amount into your DMP, you may need to consider using a different solution.

Some of the debts which can’t be included in a DMP such as utility arrears and tax can be added in an IVA and are written off if you go bankrupt.

Generally speaking, you can’t put a guarantor loan into a debt management plan. If you try to do this, the creditor can still demand payment from your guarantor even if they agree to your payment plan.

Can you choose to leave any of your debt out of the Plan?

You don’t have to include all of your debt in a debt management plan. Its a flexible solution which means you can leave one or more accounts out if you want and continue to use them.

A good example of this would be where you need to continue using a credit card to run your business. Alternatively you may simply prefer to maintain one card for emergencies.

Of course, you need to continue making the minimum payment towards any debt you do not include. As such you must ensure you can afford this as well as your Plan payment.

Keeping debt out of your Plan can cause difficulties. If you try and include allowances for maintaining the payments in your living expenses budget, the creditors you do include may not be happy. As a result they might be more reluctant to support you by freezing their interest charges.

Is there a minimum debt amount you have to include?

There is no minimum amount of debt for a debt management plan. In theory you could start a Plan to manage debts of just a few hundred pounds. In the same way, there is no maximum debt amount either. This solution can be used if you owe many thousands of pounds.

Normally the limiting factor is not the amount of debt you owe but the amount you can afford to pay into the plan each month.

Once you have calculated how much you can afford to pay into your plan, you should then work out how long it will take to repay your debt. Generally speaking, if it is likely to be over 5 years, it may not be the best option for you. You should also look at the options of either an IVA or going bankrupt.

If you want to use a debt management company to help you, the minimum payment requirement will be £100/mth.

Need more advice about whether a debt management plan is the best solution for you? Give us a call (0800 077 6180) or complete the form below. Its free and confidential.