Debt Management Plan is a debt solution that allows you to make decreased monthly repayments to your lenders
In a nutshell A Debt Management Plan (DMP) is a debt solution with a repayment schedule that fits in with your income and expenditure.
Payments are made monthly to a DMP debt agency, who will act as an intermediary between you and your creditors.
A DMP is only suitable for non-priority debts, which can include…
- Personal loans
- Bank or building society loans
- Money borrowed from friends or family
- Credit card, store card debts or payday loans
- Catalogue, home credit or in-store credit debts
A DMP can’t include:
- Court/legal fees fines
- TV Licence
- Council Tax
- Gas/electricity/utility bills
- Child support and maintenance
- Income Tax, National Insurance and VAT
- Mortgage, rent and any loans secured against your home
- Hire purchase agreements
A wide variety of free debt advisors can organize a Debt Management Plan. This approach ensures that your payments are paid in full to your creditors.
What debt problems is Debt Relief Order debt help suitable for?
A DMP might be the best debt help for you if you’re keeping up with repayments on priority debts (e.g. mortgage/rent and council tax) but are struggling with debts such as credit cards and loans.
Our debt expert’s opinion on the pros and cons…
Advantages of Debt Management Plan (DMP)
- Someone else can deal with your creditors on your behalf.
- A single monthly payment may help you manage your finances better.
Disadvantages of Debt Management Plan (DMP)
- Your overall debts will take more time to repay.
- Your creditors may not freeze the interest and surcharges on your debts.
- Your creditors may ignore your requests, or they could continue to contact you.
- A DMP may appear on your credit history, and your credit score could be affected.
Worried about debts that won't go away?
FAQs – Debt Management Plan
How much will I need to pay each month?
Will all my creditors accept my proposed repayments?
Will my employer be aware of my DMP?
How much does a Debt Management Plan (DMP) cost?
Would a DMP impact my credit rating?
What would happen to my DMP if my circumstances were to change?
Can I cancel a Debt Management Plan (DMP) after it’s set up?
Can I repay my Debt Management Plan (DMP) early?
What will happen to my house if I enter a Debt Management Plan (DMP)?
I’m self-employed – am I eligible for a Debt Management Plan (DMP)?
My spouse and I are both in debt – should we have a joint Debt Management Plan (DMP)?
How long will my Debt Management Plan run for?
Every DMP is different. How much you pay will depend upon your exact circumstances, and your income and expenditure.
There are no certainties, as your creditors aren’t legally required to accept your suggestion of repayment. That said, most reasonable creditors will accept a proposal if it’s genuinely how much you can afford to repay, and you don’t pay certain creditors more than others.
No – unlike other debt solutions, a Debt Management Plan (DMP) does not involve a public register of names.
The fee you pay will depend on the DMP provider you choose; however you should never pay more than 50% of the total monthly repayment to them. The fee may also depend upon your disposable income.
Yes, unfortunately this is unavoidable, as your credit history will show that you are no longer servicing your debts at the initially agreed rate. If you’ve already racked up defaults and arrears, these too may have been recorded on your credit file. Any records remain on your file for six years.
Because a Debt Management Plan is flexible, it can change as according to your needs. Just speak with your DMP provider as and when required.
As a DMP is an informal arrangement between your creditors and you, you could change the terms of the agreement or cancel the DMP outright.
However you should be very careful in doing so, as your creditors may quickly become less open to discussions as to how you repay your debts moving forward.
Yes you can. You can do this by either increasing the amount of your monthly repayments or, if for whatever reason a lump sum of money becomes available to you, you can settle the debt in one go.
While your house isn’t ‘tied’ to any DMP, nor are you required to release any equity as part of the DMP terms, you need to understand that a DMP is not legally binding. This means that your creditors are free to take further action against you or your property in the future. This is just one reason why you should always try to keep up with your DMP repayments.
Yes, and even if some of the debts are business debts (for example – if you’re self-employed and have business debts on a credit card or an overdrawn bank account) you can still include them in the DMP. You should however be aware that if you are indebted to suppliers, that they are not obliged to accept reduced payments, nor must they continue to supply you with goods.
There is such a thing as a joint Debt Management Plan, and it may make sense to roll all your debts into a single plan if this will make your finances more manageable.
The duration of your DMP depends on your personal situation. Once your DMP advisor understands your circumstances, they should be able to give you a good idea of the length of any future arrangement.