Self-employed and lack of paperwork When DMP is right choice
Summary: Self-employed and lack of paperwork - This paper explores the idea that a Debt Management Plan (DMP) may be a good debt solution for many self-employed people.
Paperwork & formal insolvency
When a debtor is going bankrupt or proposing an IVA they are required to present a significant amount of paperwork. Not only will information be required for each of the debts, but evidence of income and of business outgoings, tax provision and personal outgoings is also required. Most of this information is available via tax returns and/or accounts. However we don't all have accountants and our last tax returns (if only we could find them) don't tell the story of our current position. Some self-employed people are very organised with paperwork, but for those of us who aren't, the demands of formal insolvency may be too much for us.
Paperwork and a DMP
Because the principle behind a DMP is that the debtor is paying back the whole debt, the creditors do not need to see the same level of paperwork. Furthermore a DMP is not a legal process - more of an informal arrangement and again, less paperwork is requested.
DMP leading to an IVA
For some the task of getting paperwork sorted and organised is not impossible just time-consuming. In bankruptcy or an IVA, tax returns will be required as it may be that HMRC are a creditor. So it may be that the debtor simply needs time to gather the necessary paperwork, and a DMP may be an ideal short term answer to buy such time and to switch to an IVA when appropriate.
The same principle is at stake when the self-employed wants to wait to see how the business progresses. It may be that the suspicion that the business is going to improve or things are going to worsen - but there is no paperwork to back up this idea. Of course an IVA could proceed on the basis of a forecast, but it may be that for some self-employed, they would rather wait to see how the future unfolds before committing to an IVA. A DMP - even for a short time may buy them the time to confirm the right debt solution for them. The knowledge that the debts are under control through a DMP allows the self-employed to bide their time, gather evidence of income/outgoings and complete their tax returns or accounts.