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Helping You Become Debt Free

Let’s start with a big, huge CONGRATULATIONS. As you’ve arrived here on this blog, you’re clearly taking steps to address your debt problem – which is often the toughest step when you’re in the middle of mounting debt management troubles.

Now let’s move on. The debt problem that you do have will call for some careful research as to which solution is right for both your circumstances and the types of debts you have. A Debt Management Plan, while an incredibly common solution, isn’t suitable for all debts. Let’s explore what they can be used for, as well as what they can’t.

Debts that can be included in a Debt Management Plan

Debt Management Plans are only suitable for your debt problem if you owe so-called non-priority debts. Non-priority debts are those that are less serious than priority debts. For example, the potential outcome of not paying your mortgage could be homelessness, whereas not paying your credit cards would, in the worst instance, end in court.

Here’s a list of non-priority debts that a Debt Management Plan can include…

  • Overdrafts
  • 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 

Debts that cannot be included in a Debt Management Plan 

The following debts include both priority debts and fines that cannot be included in a Debt Management Plan, along with advice as to where to turn should you be struggling with each type of debt…

  • Court/legal fees fines – In the first instance you should get in touch with the court to explain your circumstances. They will endeavour to come to an agreement that you can afford. If your income has fallen, or you’ve no money remaining after essentials such as you rent and utilities have been paid, you should make this clear. They may be able to write it off if it’s proven that you’re unable to afford to pay.
  • TV Licence – Visit the TV Licensing company to set up a direct debit (you can set this up either monthly – £12.87 or quarterly – £39.87).
  • Council Tax – Contact your Local Authority and ask for the Tax Office, then explain your situation. If you can’t afford to pay the full amount, you can ask if you’re able to pay lower amounts, but you must be able to prove your income and expenditure.
  • Gas/electricity/utility bills – Talk with your utility company as soon as you’re able to. They should help you set up a repayment plan and may install a pre-payment metre to help ensure you don’t fall into arrears again in the future.
  • Child support and maintenance – If you’ve fallen into arrears with the CSA or CMS, you may be able to negotiate a repayment schedule. They’ll aim to collect the entire amount owed within two years and are able to request anything up to 40% of your income.
  • Income Tax, National Insurance and VAT – Speak with HMRC as soon as you can, as they are notoriously unforgiving when it comes to tax debt. That said it’s in their interests to agree a repayment schedule with you. Read this guide on Income Tax, National Insurance and VAT debt on the HMRC website for further details: Options for paying off your debts.
  • Mortgage, rent and any loans secured against your home – Debts in this category should take priority over all other debts, as losing your home is the most serious outcome of all unpaid credit, and having your home repossessed will also seriously impact your credit score. As well as talking with your lender, you should also speak with a debt help charity as soon as possible.
  • Hire purchase agreements – If you’re behind with your HP agreement, your lender will most likely issue a default notice following three months of missed payments to repossess the goods. If you really need to keep the goods, such as with a fridge or washing machine, you should contact a debt charity to discuss whether this would be a possibility. 

Key question: Could a Debt Management Plan write off some of your debts?

An Individual Voluntary Arrangement has many features in similar with a Debt Management Plan, including that it is used when non-priority debts are owed.

One of the most important differences between a Debt Management Plan and an Individual Voluntary Arrangement is that an IVA will write off any remaining debt at the end of the fixed term. In comparison, a Debt Management Plan runs for as long as is required until your debts are fully repaid.

Let’s take a working example, as provided by UK Government Legislation…

Type of debt owed                                          Total

BANK LOANS                                                    £4000

PAYDAY LOANS                                               £2500

CATALOGUES                                                  £2000

PHONE BILLS                                                  £500

CREDIT CARDS                                               £5000

STORE CARDS                                                 £15000

OVERDRAFT                                                    £1750

DEBT COLLECTORS                                      £3500

TOTAL                                                               £20,750

Per Month

Your Current Monthly Payment                     £125

Your Current Monthly Payment                     £685
64% Of Debt Written Off


Are you sure that a Debt Management Plan is right for you and your debt problem? Or could it be that an IVA, Administrative Order or Debt Relief Order could be more suitable?

We’ve written about how Debt Management Plans compare to Individual Voluntary Arrangements in more detail here: IVA or DMP – Which one is the best debt solution?

If you’re at all uncertain as to whether a DMP is the right move to make, explore our debt solution overview or talk with the National Debt Help team on 0800 002 9051. Alternatively you can use our contact page and we’ll call you back.