Debt Management Plan (DMP)
A DMP is an informal solution that allows you to negotiate a reduced monthly payment to settle your debts.
What is a DMP?
A Debt Management Plan is an agreement, negotiated by you or a third party, to lower your monthly payments to your creditors.
It isn’t legally binding, unlike other debt solutions, such as an Individual Voluntary Arrangement (IVA). With a DMP, your monthly payments are proposed based on what you can reasonably afford.
Will a DMP work for me?
There’s no maximum or minimum debt level needed to enter a DMP, but there are some things to consider before applying.
A DMP is good for those who are struggling to keep up with their debt repayments, but who can afford to consistently pay smaller amounts over a longer period of time.
It’s also good for those whose circumstances are likely to improve over time and who have a steady and relatively stable income.
Will a DMP hurt my credit score?
It’s important to be aware that entering into a Debt Management Plan will usually have a negative impact on your credit score – the three-digit score that reflects your chances of being accepted for credit in the future.
Is a DMP a good idea?
Ultimately, whether a Debt Management Plan is a good option for you depends on your situation, but there are some broad criteria that might make you a good candidate.
If you are currently struggling to cover the cost of your monthly debt repayments, can’t keep on top of payments to multiple creditors, or you’d like a third party to deal with creditors on your behalf, a DMP may well be an option worth exploring
Ready to speak to an advisor?
It’s important to remember that no debt solution is perfect and there is no ‘one-size-fits-all,’ which is why we recommend speaking to one of expert debt advisors, completely free of charge, about your options and next steps.
DMP Pros
- It’s affordable. Your monthly DMP repayments will depend on your personal income and expenditure, meaning it will be an amount you can afford each month.
- Your DMP will be reviewed regularly to make sure you're only paying what you can afford.
- You will be completely free of debt in an agreed period of time.
- If creditors agree to the debt management plan, any communications you have with them should significantly decline, though they may not disappear completely.
- In most cases, interest rates and charges will be frozen as part of a debt management plan.
- You won’t be asked sell your assets.
- Your name will not be added onto the Insolvency Register.
- There are certain non-fee charging organisations & charities that provide this service for free, you can contact the Money Advice Service for more information
DMP Cons
- Only non-priority debts can be included in a debt management plan. These include such expenses as credit cards, catalogues, and personal loans. For debts including mortgages, utility bills, and council tax arrears you may wish to consider an alternative financial solution.
- Your credit rating and your ability to obtain credit will be affected for the duration of your plan or possibly longer.
- A debt management plan is not a legally binding agreement. This means creditors are not required to accept it and you'll have no legal protection from creditors.
- Most creditors will agree to reduce or stop interest and charges but if they don't, the amount you currently owe could increase.
- Unlike with other solutions, no amount of your debt will be written off and you will have to pay back your debts in full.
- Your creditors may still take further action against you, such as a County Court Judgement (CCJ).