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A debt management plan takes no account of your assets. This contrasts with insolvency solutions, like bankruptcy or an IVA. If you own a car or van, you can keep it. There is no requirement to sell or downgrade. If you sell your vehicle during debt management, you keep the money.
Your motoring expenses get budgeted for. This includes a budget for servicing and annual MOT. You should be able to keep your car on the road while repaying your debts.
What if you took out a loan to buy your car? If the loan is unsecured, it will get put in your debt management plan. You stop paying the lender directly.
The lender has no direct route to repossess your car. They receive a reduced payment via your DMP. This payment continues until the balance owed has been cleared.
Secured finance includes hire purchase and conditional sale agreements. This section applies also to leased vehicles.
Making the vehicle payment is a budget priority. An allowance gets made in your debt management budget. Provided you make the payments, you’ll keep the vehicle. Your creditors are unlikely to object to a fair finance payment.
If you fall behind on the payments, your vehicle will be at risk.
Was your financed vehicle returned or repossessed early? Is a shortfall debt still owed to the finance company?
This is a debt that can get included in your debt management plan. The finance provider will get treated like your other DMP creditors. They’ll receive a reduced payment until the debt gets cleared.
You may be able to obtain car finance. If your credit score is poor, the interest rate cost may be high. Your credit rating is likely to be low during a debt management plan. Check first that you can still afford a DMP payment. Your provider can assist you with this.
There’s guidance available online. This article explains poor credit finance options well.
There are a number of types of personal insolvency in the UK. Outside Scotland the processes are bankruptcy, debt relief orders, or an IVA. In Scotland, the processes are bankruptcy and trust deeds. Each of these debt solutions has different vehicle rules.
A debt management plan is not personal insolvency.
If you enter an insolvency process, your vehicle is an asset. An asset might get sold to repay your creditors. This doesn’t always apply, so get expert debt advice in advance.
Some car finance contracts contain insolvency restrictions. You might have to return a vehicle if you become insolvent. Check your finance contract for restrictions. If restrictions are present, get in touch with a debt adviser. Some lenders do not enforce such clauses if payment continues.
Car insurance policies can contain insolvency restrictions. If you enter an insolvency process, disclose this to the insurer. When renewing your policy, make a disclosure to the new insurer. If you don’t, your policy might be void when you need to make a claim. This can also apply to other types of insurance.
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Author: Andrew Graveson – Qualified Debt Adviser & Bright Oak’s Founder
Page Last Updated: 23/09/2019