Should you stop your DMP and go Bankrupt
- 22 Nov 2021
You may be thinking about cancelling your debt management plan. Perhaps you are struggling with the payments or have realised it is going to take too long to become debt free. If so it might be better to stop your DMP and go bankrupt.
Included in this article:
- Should you stop your DMP?
- Is bankruptcy a sensible alternative for you?
- What if you are a home owner?
Rather speak to a person? Call us on 0800 044 3194 or complete the form below and we’ll call you
Should you stop your DMP?
There are different reasons why you might want to stop your debt management plan. Perhaps you are struggling with the agreed payments and it is not possible to reduce them any further.
Alternatively you may have realised that it is just going to take too long to become debt free. Perhaps you were waiting for a pay rise or a windfall which would have allowed you to pay off your debts faster, but it has not happened.
Whatever the reason you can stop your DMP at any time. You can do this simply by cancelling your monthly payment. But remember, you are still liable to repay the outstanding debt you owe. Going bankrupt could write off your debts once and for all.
Do not stop paying your debt management plan without a clear idea of how you will deal with the debt you still owe. If you leave it too long your creditors will start chasing you again.
Is bankruptcy a sensible alternative for you?
Of course the idea of going bankrupt sounds terrible. However, for some people it is actually a really good solution. This is particularly the case if you can’t really afford to make any payments towards your debts.
Once you are bankrupt, if you have no surplus income you do not have to make any further monthly payments. The outstanding money you owe is simply taken away from you. All collections actions against you has to stop. You will be bankrupt for just 1 year and then be completely debt free.
If you have a surplus income (even if this is small) you do still have to pay it towards the money you owe. However the payments only last for 3 years. They then stop any any debt still outstanding is written off. This is far less time than the years of payments you were likely to have had in your DMP.
If your debt is less than £20,000 you should also look at the option of a debt relief order. As with Bankruptcy no monthly payments are required but the application fee is far lower.
What if you are a home owner?
If you own your home you may be concerned that if you stop your DMP and go bankrupt your property is going to be at risk. In fact this is not always the case. It depends on the amount of equity you have.
Where there is little or no equity, the risk to your home is actually very low. You will not have to sell it. You will still own it and be able to continue living in it as long as you keep up the mortgage payments.
Bankruptcy may not a sensible option if you do have equity. If so your home could be at risk unless your share can be raised to pay towards your debts. In this situation you may need to stick with your debt management plan. Alternatively you could consider switching to an IVA if you are looking to reduce the time it will take to become debt free.
If you are renting bankruptcy will have no affect on your property. Want to know more about how your home will be affected if you go bankrupt? Give us a call ( 0800 044 3194) or complete the form below.
Hi at the moment my husband and I pay £630.00 to a dmp a month. I’ve had to cut my hours this month as for the last year my son has had severe mental health problems and I’ve worked 3 nights a week but my son is not at school alot so I’m not managing to sleep in the day, so basically I’ve had to cut my work to just two nights a week. Now we can only pay £100.00 to the dmp a month. So we are considering bankruptcy but I was wondering if it will be rejected because I’ve changed my hours.
Hi Doreen
There is nothing to stop you going bankrupt if you wish. The fact that you have reduced your hours is not relevant. The official receiver will completely understand that this is necessary to care for your son.
If you would like to discuss your situation in more detail or want further advice about the bankruptcy process, please don’t hesitate to give me a call. I would be happy to have a chat with you (this is free without obligation).
Hi, I am currently in a DMP but some of the companies I owe money haven’t stopped interest etc and I have realised that it is going to take far to long to pay off my debts. I am thinking about stopping and going bankrupt.
I have one debt though that is tied into my parents and if I don’t pay then they have to, I want to avoid this if I can but know that’s not easy? Any advice?
Hi Charlie
This situation would need careful thought. If you go bankrupt all your debts are automatically included. You would not be able to leave the loan your parents have to pay out (I assume it is a guarantor loan). The loan company are likely to find out even if you don’t list them on your application. In addition, unlike in your DMP, the in bankruptcy you are not allowed to leave enough money in your living expenses to cover the guarantor loan payment.
There are a number of things you could consider. If you are living with your parents, you are allowed to include an amount for rent to them in your living expenses each month. They could then use this money to pay the loan on your behalf. Another is you could continue with your DMP until the guarantor loan is paid and then go bankrupt.
If you want more advice about the options, please give me a call. I would be happy to have a chat with you (0800 044 3194).