Money Advice, Debt Advice & Debt Help
What if my income goes up during a debt management plan

What if my income goes up during a debt management plan

What if my income goes up during a debt management plan

Your income may go up during your debt management plan. If so, you decide what to do with your extra money. You will not be forced to increase your monthly payment although doing so will help you repay your debt faster.

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What if my circumstances change during a Debt Management Plan?

It is likely that your circumstances will change during your Debt Management Plan (DMP). What are your options if your income increases? Can you reduce your payments if your income falls? To find out more please visit: http://beatmydebt.com/debt-management-plan-frequently-asked-questions/what-happens-if-my-circumstances-change-during-a-dmp

Do you have to increase your debt management plan payment if your income goes up?

You don’t have to increase your payment if your income goes up during a debt management plan (DMP). It is a flexible solution. This means you are not legally obliged to change the amount you pay in each month even if you can afford to do so.

You have the choice to spend the extra money you now have on other things or save it.

Of course, it does make sense to increase your DMP payments if you can afford to do so. The more you pay in each month, the faster your debts will be paid and the sooner your Plan will be finished.

However, if your goal is to become debt free as soon as possible, rather than simply increasing your payments, the smarter option is to save any extra money you have. Your saved funds can then be used to offer one or more of your creditors a lump sum to settle the debt you owe. This will significantly increase the speed at which you are able to complete your Plan.

If your income is likely to increase in the short term, a debt management plan could be a sensible option. You remain in control of what you do with your extra money.

What if your income falls during the Plan?

If you have a permanent fall in your income during your debt management plan, you are likely to struggle to keep up with your payments.

You might be able to manage this problem by reducing some of your living expenses. But where this is not possible, the first thing to consider is whether it is possible to reduce your payment. You should be able to do this as long as you can still afford to pay a reasonable amount into your Plan.

Remember, if you reduce the amount you pay into your DMP each month, its length will be extended.

In most cases, a debt management plan will only be feasible if you can afford to pay at least £100/mth. Where the amount you can pay is less than this (or nothing at all), you should consider whether a different debt solution will now be better for you.

Sensible options to think about in these circumstances are bankruptcy or a debt relief order. Both of these can be used where you can’t afford to pay anything towards your debts each month. They can be ideal if you live in rented property or own a home with little or no equity in it.

Reducing your DMP payment is possible. However where you find yourself needing to do this, it is also sensible to think about whether a different debt solution would be a better option for you.

Options if your living expenses go up or down

Rather than a change in your income, it is just as likely that your expenses will go either up or down during the course of your debt management plan.

There are many reasons why your expenses could increase. Common examples are if you have a new baby or a sudden increase in rent or utility bills. Unless your income also goes up to compensate, you are likely to struggle to keep up your DMP payment.

In the same way as if your income falls, you will need to take steps to either reduce your DMP payments or, where this is not possible, consider an alternative solution.

Of course it is also possible that your expenses could go down. Perhaps one of your children starts to go to school thus reducing child minding and nursery fees. Alternatively, perhaps a dependant child leaves home.

Like if your income had increased, you then have the choice about what to do with the money you are now saving. Whether or not you use to repay your debts more quickly is up to you.

Are you struggling with your debt management plan payments? Give us a call (0800 077 6180) or complete the form below. The advice is free and confidential.

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