Here we explain the types of debt that can be included in Debt Consolidation plan.
Clearly, debts of all type can be included an debt consolidation loan. Once your loan has been approved; you can use it to repay any type of debt.
In most cases just debts from unsecured borrowing are eligible in a Debt Management Plan or IVA. However, we can help with other types of debts – not just from unsecured borrowing. Any service which you’re no longer using where money is outstanding has the potential for inclusion.
Unsecured borrowing
The following types of debts are eligible for inclusion in a Debt Management Plan or IVA:-
- Credit cards
- Personal loans
- Store cards
- Overdrafts
Some creditors will not allow the inclusion of loans for which no contractual payments have been made and some where the credit agreement was signed less than 3 months ago.
No longer user of service
If you have an outstanding bill for a service and have ceased using that service - then there is the possibility to include this in a IVA or Debt Management Plan. Examples:-
- Rent arrears (from a previous address)
- Disconnected mobile phone bill
- Gas, electric or water bills (a previous address and supplier)
- School or nursery fees.
- Professional fees. (Dentist, Doctor etc)
Goods received but not paid for in full.
Depending on the type of goods, it may or may not be possible to include these in a debt consolidation plan. For example, if you have bought a fitted carpet on credit supplied by the vendor; then it is unrealistic they will dismiss your best efforts to make repayment in favour of visting your home and ripping it out. They will get more money back if they allow you to include this into a debt management plan.
Shortfalls on repossessed items
If your home or other assets have been repossessed and sold, there may remain a shortfall for which you remain liable. Such debts are unsecured and can be included in an IVA or Debt Management Plan.
Debt excluded from IVA’s and Debt Management Plans
Hire purchase agreements or secured loans
If you fail to maintain secured loan or hire purchase payments, for example on a car, then the finance company are likely to repossess. An allowance will therefore be made for these payments to be maintained in your IVA or Debt Management Plan. So while these debts can’t be included in your plan,
Many people we speak to have borrowed money to buy a car, but do not know off hand is this debt is or is not secured against the vehicle. If you signed the credit agreement at the car showroom, then it is likely the loan is secured against the car. If you borrowed the money from elsewhere, such as your bank, then this will be an unsecured debt.
This is not the same as borrowing money from your bank and then using it to purchase a car.
Other debts which must be paid outside of an IVA or Debt Management Plan include.
- Council Tax Arrears.
- Any fine or penalties imposed by a court.
- Liabilities arising under an order made in a family or domestic court action such as CSA claims for child support.
- Liabilities arising under a confiscation order made under S.1 of the Drug Trafficking Act 1986 or S.71 of the Criminal Justice Act 1988.
Informal Loans
Loans between family members and friends can only be included in a DMP or IVA if these loan have been formalised with the proper legally binding documentation, for example a credit agreement drawn up by a solicitor. If there is no documentation the other creditors would claim these debts cannot be proven and therefore all disposable income must be used to repay provable debts alone.