Bankruptcy or Debt Management Plan

For free & impartial money advice you can visit MoneyHelper. We work with The Debt Advice Service who provide information about your options. This isn’t a full fact-find, some debt solutions may not be suitable in all circumstances, ongoing fees might apply & your credit rating may be affected.

Are you worried about your debts? Are you thinking of bankruptcy or a debt management plan? You’re not alone. Every month, over 170,000 people visit our website for advice on dealing with debt.

In this guide, we’ll answer your questions and help you understand your options. We will cover:

What bankruptcy is and how it works
How to decide if bankruptcy or a debt management plan is right for you
How to apply for bankruptcy and what it might cost
How bankruptcy can affect your life and your credit history

Our team knows how hard it can be to deal with debt; some of us have been in the same situation. But don’t worry; we’re here to help you figure things out.

How To Avoid Bankruptcy With A Debt Management Plan?

A Debt Management Plan (DMP) is a plan offered by a debt management company that best suits you and your finances.

In debt management plans, an insolvency practitioner talks directly to your creditors and works out a payment plan for your debts. Debt management plans are for people who have multiple creditors and are having a hard time paying them off one by one.

In a debt management plan, you pay the money to your company counsellor and he hands out the payments to your creditors.

Also, you cannot take more credit card debt while you’re on a debt management plan. Credit cards are frozen while you’re on a debt management plan because credit cards add to your debt and you can’t do that while you have a debt management plan to eliminate your debt.

The fees associated with a debt management plan aren’t a lot. You have to pay the respective fees of the counsellor appointed to you and the general fees of the company.

For this money, you will have some highly qualified people fight your debt case for you and work out a payment plan that you can afford. In almost all cases, getting a debt management plan lowers your monthly payments down to the value which you can afford.

It’s also always worth knowing the pros and cons of a debt management plan.

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Individual Voluntary Arrangements

In Individual Voluntary Agreements (IVAs), you have to pay all the disposable income in excess of your living expenses to your creditors for a specified period of time.

The terms of the agreement might include that even if your disposable income increases during an IVA, you’ll have to pay that extra money as well to end the IVA early. IVAs usually last around five years.

However, after these five years, you will be debt-free. Whether it was student loans that you wanted to pay back or some unsecured debt, it ends with your IVA.

In some rare cases, where you miss your scheduled IVA payments, your IVA is extended for some time until the missed payments have been compensated for.

Knowing which debt management plan is right for you is essential, so don’t make any decisions until you know all of the facts.

How a debt solution could help

Some debt solutions can:

Stop nasty calls from creditors
Freeze interest and charges
Reduce your monthly payments

A few debt solutions can even result in writing off some of your debt.

Here’s an example:

Situation

Monthly income	£2,504
Monthly expenses	£2,345
Total debt	£32,049

Monthly debt repayments

Before	£587
After	£158

£429 reduction in monthly payments

If you want to learn what debt solutions are available to you, click the button below to get started.

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Frequently Asked Questions (FAQs)

Do DMPs Actually Help In Avoiding Bankruptcy?

Yes, DMPs are a good way to end your debts. This is because in a DMP, a professional is negotiating with your creditor. They know what payments to offer, and when. This makes the case in your favour as now you’ll have a registered counsellor handling your debt payments.

Do I Still Have To Pay Child Support While On A DMP?

Yes, child maintenance payments are taken into account before calculating the amount of your monthly payments. You still have to pay child support, even if you’re on a DMP.

Can You Go To Jail For Not Making DMP Payments?

No, you cannot go to jail for missing DMP payments. Only your assets can be seized by the court.

Does A DMP Have An Impact On Your Credit Scores?

Yes, a DMP lowers your credit rating and has an impact on it for the next 6 years.

How Long Can I Be Chased For Debt In The UK?

You can be chased for debt up to 6 years since the last notice to make payments. After that, your debt becomes null.

Bankruptcy can be a painful process to experience, which is why it is essential to look for other options to get rid of debt…

Try and get a debt consolidation loan or a DMP (if you’re able to afford it) because when you’re bankrupt, you are barely left with anything in your name.

If you have any more questions or need debt help, do reach out at the given email address. I’d be happy to help.

Good luck!