How Will a Debt Management Plan Affect My Job?

Will a Debt Management Plan affect my job? I was recently asked this question, and it’s definitely a worthwhile question among people considering a DMP.

It can seem unfair that using a debt solution would affect your employment and therefore your income, but unfortunately, some debt solutions – in some cases – can affect your employment.

Allow me to explain…

What is a Debt Management Plan (DMP)?

A Debt Management Plan is a debt solution that can be set up independently by negotiating with creditors, or it can be set up on your behalf by debt charities and commercial debt management companies.

With a DMP agreed upon, you make one monthly payment into the DMP, which then gets proportionally split (based on debt amounts) between the creditors. You can use it to pay back multiple non-priority debts, such as credit cards, personal loans or store cards.

The monthly payment you make is calculated and proposed based on what you can afford to pay while also meeting essential monthly expenses, such as rent, bills, food etc. It’s normal to have the interest frozen on all of the debt to help you repay it quicker, although creditors don’t have to agree to this.

More information can be found on Money Helper’s DMP page.

Do you have to pay?

There are ways to have debt written off in the UK.

If you genuinely can’t afford your debt repayments then looking into whether you could have your payments lowered or written off might be just what you need.

If you want to find out whether you qualify for having debt written off or payments lowered then fill out the short form below.

Do I have to declare a Debt Management Plan?

It’s unlikely that you’ll have to declare that you’re using a DMP to another party. But there can be some exceptions, especially if you’re employed in certain positions.

What are the benefits of a Debt Management Plan?

The main benefits of using a DMP are:

You only repay what is deemed affordable based on your situation.

You might get interest and other fees frozen.

You only have to manage a single monthly repayment to all non-priority creditors, which can help you budget and stay on track. It might even prevent other arrears.

They can be set up for free yourself or by debt charities who speak to creditors for you.

Can you lower your repayments?

If you’re struggling to pay back your debt, then you might qualify for a debt solution.

Some solutions lower your monthly payments while others write off a portion of your debt.

To find out whether they could work in your situation, hit the button below.

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What are the negatives of a Debt Management Plan?

As with all debt solutions, there are also limitations to using a DMP, including:

The creditors don’t have to agree to a DMP and they could instead chase you for full payments or take legal action. This is less likely if you prove you’re making a reasonable DMP offer.

A DMP is a non-legally binding debt solution, also known as an informal solution. Thus, creditors can pull out of the agreement at any time if they so wish.

Priority debts cannot be included, so it might not be suitable for some debtors.

Using a debt management company to set up your DMP will incur fees.

And there is another drawback to using a Debt Management Plan, which is relevant to the topic of DMPs and employment…

Does a DMP appear on your credit file?

Yes, when you use a Debt Management Plan, you will be paying back less than the original repayment amount each month. Partial repayments decrease your credit score and make it more difficult to get approved for credit in the immediate future.

How long does a Debt Management Plan affect your credit rating?

Credit file records remain visible for six years. Therefore, each partial repayment you make will stay on your credit file for six years before they are automatically deleted.

What happens if you go on a Debt Management Plan?

When you enter into a Debt Management Plan with creditors, it is not recorded on any register. This is because a Debt Management Plan is a non-legally binding debt solution.

You simply have to keep up with the single monthly repayment until all creditors have been fully repaid.

Will a debt management plan affect my job?

It’s unlikely that a Debt Management Plan will affect your job.

You don’t usually have to tell your employer that you’re using a Debt Management Plan to get out of debt, but you may be obligated to tell them if it’s in your employment contract.

When might your employer want to know about a DMP?

Your employer may want to know about a Debt Management Plan when you work in finance, such as working as an accountant or insolvency professional.

They could have inserted a clause into your employment contract that states you must tell them if you use a Debt Management Plan or other debt solution. You should check this to see if you need to tell your employer about the DMP. if it’s not in the contract, you’re not obligated to tell them.

Similarly, most jobs don’t include a credit check or require a good credit score, so a reduced credit rating – due to using a DMP – won’t affect most people’s employment.

But if you work in finance, you might need to tell your employer. Or if you go for a job interview, your credit file may be checked and the DMP would then be obvious to the employer.

Can I work in a bank with a DMP?

It’s unlikely that a DMP will stop you from working in a bank, but it really depends on the position you will be taking within the bank.

This is a question that pops up frequently on online forums. Here is just one example:

Source: https://forums.moneysavingexpert.com/discussion/6339947/dmp-starting-a-job-in-a-bank

I can’t say for certain whether your DMP will affect your position or employment opportunities within UK banks, but I do believe it’s best, to be honest if asked during an interview.

Can debt solutions ever affect your employment?

Yes, there are debt solutions that can affect your job if you work in certain professions. The debt solutions that are most likely to affect some jobs are:

Bankruptcy
Individual Voluntary Arrangement (IVA)

For example, undischarged bankrupts cannot work in a number of positions, including company director, estate agent, charity trustee and insolvency practitioner.

An Individual Voluntary Arrangement (IVA) is a legally binding debt solution that can stop you from working in some professions in the financial sector. Or it can cause you to meet certain conditions to remain employed. The IVA works very similarly to a DMP.

Because a Debt Management Plan isn’t a formal insolvency solution, it has a lesser potential affect on your employment.

Can anybody find out I’m using a DMP?

Nobody will find out that you’re using a DMP unless you tell them or you’re forced to tell them due to a contractual obligation. Your creditors cannot discuss the DMP with anybody else, such as family, friends or employers.

The DMP doesn’t appear on a public register, which is the case for IVAs, DROs and bankruptcy. These debt solutions appear on the Individual Insolvency Register

Do you have to tell your employer about a DMP? (Quick summary)

You don’t have to tell your employer you’re using a DMP unless it’s stated in your employment contract. This is unlikely unless you work in trusted positions in the financial or legal sector.

DMP alternatives

Did you know that a DMP is just one of many different debt solutions? You might be better suited for a different solution, including options that can write off some or all of your debt.

Speak to a UK debt charity for personalised help choosing a debt solution, and start to understand your options by reading my How to Get Out of Debt guide.