The Government Debt Management Plan
As many as 8.3 million Brits are currently unable to repay their debts – a figure that includes credit card debt which has surged by 8.1% over the past 12 months. Reassuringly however, those in the UK enjoy some of the widest range of Government debt management schemes in the world. So if you’ve arrived here searching for Government debt management in the hope of discovering a regulated debt solution suited to your needs, rest assured that you’re in the right place.
The term ‘government debt management’ may refer to several forms of debt solutions, including: Individual Voluntary Arrangements (IVAs); Debt Management Plans; Administration Orders and Debt Relief Orders. We’ve covered these forms of debt management schemes in our guide: Government Debt Advice and in this guide, we home in on government debt management plans.
Government Debt Management Plan – A Brief Overview
A Government Debt Management Plan is a form of debt solution that has a set payment schedule based on your income and expenditure; it serves as an official agreement between you and your creditors.
Government Debt Management Plans are usually suited to those who can either:
- Only afford to pay their creditors a reduced amount on a monthly basis
- You have debt issues but you’ll be able to continue making your full repayments in a few months
A Government Debt Management Plan is only suitable for non-priority debts, such as:
- Personal loans
- Bank or building society loans
- Money borrowed from friends or family
- Credit card, store card debts or payday loans
- Catalogue, home credit or in-store credit debts
In contrast, Government Debt Management Plans can’t include:
- Court/legal fees fines
- TV Licence
- Council Tax
- Gas/electricity/utility bills
- Child support and maintenance
- Income Tax, National Insurance and VAT
- Mortgage, rent and any loans secured against your home
- Hire purchase agreements
Government Debt Management Plan – The Process
- The first step to setting up a Government Debt Management Plan is to check the Financial Services Register for a company authorised to help.
- The company you’ve chosen will work out what your monthly payments will be, based upon the income and expenditure information you’ve provided (this will include your assets, debts, income and creditors).
- Finally the company will communicate with your creditors to request their agreement with the plan. It’s important to note that they are not obliged to agree with the plan. You should also note that your creditors will still be able to:
- Request full and final settlement in the future
- Recover the money owed, despite you keeping up with the agreed repayments
An IVA – A Promising Alternative to a Government Debt Management Plan
Individual Voluntary Arrangements (IVAs) could allow you to be debt-free within five years, with up to 70% of your debt completely written off. Here are some of the key differences between an IVA and a DMP:
- An IVA halts all interest and charges, with a DMP there’s no certainty that this will happen.
- An IVA provides you with a set end date, which is usually five years, although if you have been required to remortgage you may need to continue for an additional year.
- Once an IVA is approved your creditors must stop chasing you, whereas with a government management plan your creditors can still follow the usual debt collection process.
- With an IVA you may benefit from a percentage of your debt being written off, whereas with a DMP you must repay 100% of your debts.
If you’re already in an existing government debt management plan, you may be able to move your debts into an IVA. Speak with our team about whether this could make for a savvy financial move.