Debt Management Plan for Self-Employed – What’s Possible?
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.
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 self-employed and thinking about a Debt Management Plan (DMP)? Then, you are in the right place. We are here to help you understand what’s possible when you choose a DMP.
Our article will guide you through:
- What a Debt Management Plan (DMP) is and how it works
- The types of debts you can include in your DMP
- How to draft a payment offer for your DMP
- If you can use credit during your DMP
- Other debt solutions if a DMP doesn’t seem right for you
We know you might be worried about picking the right DMP for you. That’s normal! Over 170,000 people visit our website each month seeking advice on debt solutions.
We understand your worries and the need to keep your business going while dealing with personal debts.; some of us have been there too. With our expertise, we’ll help you understand how to manage your debts better.
Alternatives to a DMP if you’re self-employed
When the 1986 Insolvency Act first introduced Individual Voluntary Arrangements (IVAs), they were intended for use by businesses as an alternative to bankruptcy.
You’ll make a single monthly payment split among your creditors, just like with a DMP. The normal length of an IVA is five years, with an additional year of payments if you cannot use any of the equity in your house during that time. It will also appear on the public Insolvency Register and your credit report. However, all unpaid debts are eliminated at the conclusion of the arrangement.
You’ll probably be allowed to keep all of your assets, including your home if you’re a homeowner if you choose a self-employed IVA. In general, you must keep all tools and equipment necessary for your job to pay your creditors back. However, if you own particularly valuable non-essential personal or business assets, such as an expensive luxury car, you may be asked to trade it in for a less expensive model and contribute the difference towards your IVA.
Whether you are a lone proprietor or part of a partnership, IVAs are an option. And unlike bankruptcy, you have full freedom to join or leave a board of directors. Additionally, a self-employed IVA will be created to allow for the possibility that your payments may require additional flexibility in relation to your income. Additionally, an IVA will typically be a little more flexible than if you were in a conventional IVA for only personal debts, even though you will need the agreement of your IP to access more than £500 of credit during one.
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What Types of Debts can be Included in Debt Management Plans?
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.
How do I Draft a Payment Offer for My DMP?
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