Debt Management Plan

You make only one affordable payment to a debt management firm for all your debts

You make only one affordable payment to a debt management firm for all your debts

Debt Management Plan

A Debt Management Plan, or DMP for short, is an informal agreement you make with your creditors where your monthly payments are reduced if you can show that you are struggling to make your contractual repayments.

There is usually a debt management firm that manages your DMP and deals with all your creditors and negotiates reduced payments with them.

Debt management firms normally charge a fee for their service, however there are free debt management plans available from the not-for-profit sector. Please see the MoneyHelper website for further details by clicking here.

If you only have one or two debts, then you may wish to contact your creditors yourself and negotiate reduced payments. This would cut out the need of a debt management firm and you would therefore save on their fees.

Advantages of a DMP

  • You make only one affordable payment to a debt management firm for all your debts.

  • Details of your DMP is not public information and will not be listed on the insolvency register.
  • Although most debt solutions have a negative impact on your credit rating, a DMP will have less impact compared with other formal insolvency solutions.
  • Interest and charges are usually frozen by creditors.
  • Any debt recovery action is usually stopped by the creditors.

Disadvantages of a DMP

  • There is usually a fee charged by the debt management firm.
  • Creditors can carry on with any debt recovery action like bailiffs.
  • Because you will be reducing your monthly payments in a DMP, it will take you longer to repay your debt.
  • The DMP will have a negative impact on your credit rating.
  • Creditors can change their mind about the DMP as they are not legally bound by it.

Whether a DMP is the best solution for you would depend on your circumstances and will require specialist debt advice. Speak to one of our debt counsellors by clicking on the link below.