Will a Debt Management Plan (DMP) Affect My Job? 2022 Laws
While a debt management plan (DMP) can definitely do wonders when it comes to getting you out of debt, it can have unexpected effects on other parts of your life.
Many debtors that consider debt management plans are usually very concerned about how it might impact their job.
In this post, I’m looking at what effects a DMP may have on your employment if any at all.
Is it Possible for Debt Solutions to Harm My Job?
In most cases, entering into a debt solution does not affect your job in any way.
However, there do exist some circumstances in which your job could be affected. This depends on the type of job you have as well as the type of debt solution that you opt for.
For example, there are some jobs in the financial sector which require you to have a perfect credit rating.
Examples of this may be if you have a career in banking or accountancy. Debt solutions reduce your credit rating by quite a lot. In such cases, your job may definitely be affected.
As I mentioned earlier, most jobs are not affected by any debt solutions that you decide to opt for. Furthermore, out of all the debt solutions available in the UK, a debt management plan is one of the most informal ones.
Thus, for some jobs, you may find that if you had opted for a more formal debt solution (such as an IVA or bankruptcy), then your job may have been affected but a DMP does not harm it in any way.
While it’s true that most jobs are not affected by any debt solution which you may opt for, if you have any doubts at all, you should contact your company’s HR department.
Your HR department is obligated to keep your enquiry confidential. Thus, you will be able to find out if a DMP affects your job in any form without the enquiry itself harming your employment status.
If your job requires you to keep a clean credit record and/or if your employer performs regular credit checks on you, then you might want to think twice before entering into a DMP.
This is because a DMP involves you making reduced debt payments towards your creditors which causes your credit score to fall.
Out of every debt solution that is available in the UK, bankruptcy is the one that has the highest negative effects on most jobs. Following bankruptcy are IVAs and then DMPs which are the least formal and have the least amount of effects on your job.
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Will My Employer be Informed About My Debt Management Plan?
Your employer is not informed by your DMP provider or your creditors about your debt management plan. You are also under no obligation to inform your employer about your DMP.
Furthermore, since a DMP is an informal solution, your name and details will not get logged into any official register (such as the Individual Insolvency Register).
Hence, there’s virtually no way for your employer to find out about your DMP unless you tell them yourself.
Even if your employment contract states that you have to inform your employer when you become insolvent, you don’t need to tell them about it. This is because a DMP is an informal solution and entering into one does not mean you are formally insolvent.
A debt management plan is an informal solution which involves you paying back unsecured debts in the form of reduced payments according to an agreed-upon repayment plan.
These payments are made by you through your own bank account. These payments are not taken directly from your wages, thus, it has nothing to do with your place of employment.
In any case, I’ve seen that most people start performing better at their jobs once they enter into a DMP. This is because a DMP addresses their debt problems and they are able to give their full attention to the tasks at hand rather than worrying about their debts.
Additionally, since a debt management plan is an informal option of taking care of your debts, it’s also quite flexible in terms of your payments.
Thus, if in the future, your employment status changes, changes can be made to the terms of your DMP to accommodate your reduced income.
Can I Enter into a Debt Management Plan if I’m a Company Director?
Legally, there’s no reason why you should not be able to continue your career as a company director if you enter into a DMP. Entering into a DMP does not mean that you are formally insolvent.
Thus, you are not required to make your financial situation known to your fellow directors if your contract states that you are to inform them if you become insolvent.
That being said, there’s one thing about being a company director with a DMP that you need to be aware of. If you are a company director, there’s a chance that you may owe money to HM Revenue and Customs (HMRC). This could be either Tax debts, VAT arrears or both.
It’s important to note that debts owed to HMRC cannot be included in a DMP.
If you have such debts, then you may want to opt for some other type of debt solution. You can ask your DMP provider for debt advice about which debt solution you should go for.
You can also opt to contact a debt charity as they’ll be able to provide you with debt help for free. They will assess your financial situation including your finances, income, living costs, etc. and provide you with options that are most suited to you.
Be sure to seek debt advice from an agency that is authorised and regulated by the Financial Conduct Authority. The Financial Conduct Authority (FCA) has a strict set of guidelines which are enforced to ensure that you, the debtor, are treated fairly.
Make sure to keep your creditors in check to ensure that don’t pursue legal action against you while you’re seeking debt advice.
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In conclusion, unless your work in the financial sector such as in a bank, a DMP won’t affect your employment status.
You can contact your HR department just to be sure if you have any doubts about it at all.
I hope you found this information useful. Let me know if you have any further questions.