Is my house safe in a Debt Management Plan (DMP)?
Summary: For homeowners, the question of the safeguard of their property is of paramount concern, and this article seeks to explore risks and safeguards involved when debtors enter a DMP.
It is important that we are aware of the possible consequences to our housed if we fall into debt or opt for a debt solution.
Maintaining mortgage payments
It almost goes without saying that if we own a property with a mortgage that we need to maintain such mortgage payments. Similarly with loans or debts secured against the house. Failure to do so is likely to lead to the repossession of the property.
Repossession and debt
No one is going to start a repossession process after one late credit card payment. However breaking a contractual agreement on credit that we have used is a serious matter that if not dealt with can have serious consequences for our property. Creditors who are owed over £750 can start bankruptcy proceedings against us. Creditors may obtain a County Court Judgement (CCJ) that can be a stepping stone towards seeking a charging order against the property - effectively securing the debt against the property. Therefore solutions to a debt situation need to be sought, not least by homeowners.
Is a DMP a legal solution?
It is not - at least in the sense that creditors are legally bound by the plan or prevented from taking further action. However it is very unlikely that in a reasonable DMP that creditors will pursue further action. Their debt is being repaid in a managed way and most homes will be quite safe whilst debts are being repaid. But - creditors can target a debtor's house. It may be that the DMP appears unreasonable to a creditor, it may they are looking for the extra security of tying the debt to the property. Some individuals may feel that the best way to have their debt repaid is by filing for bankruptcy. HMRC will unquestionably target a property if they feel this is the best way to recover a tax debt.
The popularity of IVA's
This is one major reason for the increased popularity of IVA's. As long as the mortgage continues to be paid, and the agreed IVA is maintained, then creditors are legally prevented from taking any action against a debtor's property. However not everyone qualifies for an IVA, and creditors have to agree to it. Therefore a DMP becomes the best way to repay the debt and certainly provides a much greater chance of protecting a property than continued missed payments on debts.