Debt not included in a DMP

What debt cannot be included in a Debt Management Plans?

As a debt solution, Debt Management Plans (DMPs) are one of the more common. They are predominantly aimed at those with unsecured debts that have some money left over at the end of the month after essential expenditure.

As DMPs are not a legally binding agreement, not all debts can be included. While it is fair to say that most unsecured debt can be, there are a few instances when this is not the case.

Tax & VAT debt

Unsecured debt owed to HMRC may not be included in a DMP. Should an individual have tax or VAT debt, it is worth contacting HMRC as they may be able to offer an alternative repayment schedule. An Individual Voluntary Agreement may be a suitable alternative if money is owed to HMRC.

County Court Judgements (CCJs)

CCJs will not automatically be eligible for a DMP as the debtor would need to apply to the County Court to amend the repayments. Where CCJs are concerned, it may be worth considering an IVA as an alternative.

Maintenance and Child Support

As with most debt solutions, Maintenance and child support may not be included within a DMP.

Secured Debt

Secured debt refers to any debt that will result in the loss of property or assets as the result of a default. If a charging order has been applied to a property as the result of failure to repay previous unsecured debt, they are now, in effect, secured and as such cannot be included within a DMP.

Hire Purchase

Items such as a car that has been purchased on a Hire Purchase (HP) agreement cannot be included in a DMP as they are technically a secured loan against the item purchased (i.e. in the event of a default, the lending company will simply repossess the car). However, by using a DMP to reduce monthly repayments to other debt, it may be possible to free up enough income to continue with the HP repayments. This could be invaluable where a car is essential to work.

Where the overall debt includes any of the above forms of debt, it may be worth considering alternative debt solutions, such as an IVA or Bankruptcy. It is always important to seek advice either from one of the many non charging organisations, such as the Citizens Advice Bureau (CAB), or from a money advisor, Insolvency Practitioner (IP) or Debt Management Company.