Can I get a mortgage with a Debt Management Plan

You can negotiate a DMP with your creditors by using a DMP provider. Those in debt usually opt for a third-party negotiator, such as Payplan, to represent and negotiate, removing the stress of dealing with creditors.

To work out your monthly repayments you’ll need to put together a budget showing your income and expenditure. You’re not expected to live unreasonably, living costs need to be accounted for but you will be expected to try and put as much as possible towards repaying your debt. You might need to provide documents such as your pay slips and bills to support your budget proposal. A debt management company, such as Payplan can help you with this.

Your budget will be presented to your creditors, who will decide whether they will accept your proposal. If your proposal is accepted and your creditors are happy with the suggested monthly repayments, they may even freeze interest. You’ll usually pay your debt in full, but with more manageable single monthly repayments.

Many people in DMP’s find paying one monthly payment to their DMP provider, who then distribute that payment amongst the creditors, far easier and less stressful than paying multiple creditors various sums. It can make the debt far more manageable, but it isn’t legally binding so it’s important to remember creditors can take legal action at any point during a DMP. If the creditor has accepted the repayment arrangement and you keep up with the payments it is less likely that the creditor will take legal action.

Not all debts can be included in a DMP. Debts are often grouped into ‘priority’ and ‘non-priority’ debt. DMP’s are designed for non-priority debt.

Priority:

• Mortgage and rent arrears
• Secured loans, for example against your home
• Court fines
• TV Licence
• Gas/Electric arrears
• Council Tax arrears
• Child support/ maintenance
• Income Tax arrears
• National Insurance arrears
• Hire Purchase agreements for essential items

Non-Priority:

• Personal Loans
• Credit card debt
• Store cards/catalogue debt
• Payday loans
• Bank loans
• Building society loans
• Overdrafts
• Debt to friends or family

Debt Management Plans are designed for those who have enough disposable income to make reasonable repayments and for non-priority debts. This means that you’ll still need to pay off any priority debts while paying your DMP and taking care of living costs, so it’s important you have enough disposable cash to do so.

They also depend on creditors agreement; however, lenders often want to work with those in debt usually agreeing to reasonable repayment plans as this increases the likelihood of repayment and helps prevent credit issues like bankruptcy.

• DMP shows willingness to co-operate with creditors and intention to pay in full
• Creditors might freeze interest and charges
• Can reduce monthly repayments
• Using a DMP provider can help reduce the stress of dealing with multiple creditors
• Help manage unsecured debt
• Making a single payment can help you budget

• It’s not guaranteed that your creditors will freeze the interest on your debt
• It can take several years to repay your debt
• Creditors are still free to take legal action against you and aren’t legally required to cease contact
• You will still need to pay your debt in full

Your credit score will probably take a negative impact.

A DMP doesn’t actually get recorded on your credit report as a sole record, but any credit issues surrounding it will be. It’s likely any missed payments and defaults you’ve had leading up to your DMP would have caused a drop in your credit score, additionally the reduced repayments you make during your DMP will also make an impact. Missed payments and defaults stay on your credit report for 6 years, but accounts you have with creditors included in your DMP could be marked with a ‘DMP flag’- this shows that creditors are aware of the lower payments and have agreed to this.