Debt Management Plan (DMP)

A Debt Management Plan (DMP) is an informal arrangement between you and your unsecured creditors to repay your debts at a rate you can genuinely afford. Our advisers will assess your full financial situation and explain whether a DMP or another solution is most appropriate for you.

Advantages and Disadvantages of a DMP

A DMP is one of the most flexible debt solutions available, but it is not the right choice for everyone. Read the balanced summary below before speaking to an adviser.

Whether this solution is right for you depends entirely on your individual circumstances. Our advisers will assess your situation and explain all available options before any recommendation is made.

How a DMP Works

1. A full income and expenditure assessment is carried out to determine what you can genuinely afford each month.
2. Your adviser (or a debt management company) contacts your creditors and proposes reduced monthly payments.
3. If your creditors accept the proposal, you make one monthly payment to the plan administrator, who distributes it to your creditors.
4. Your creditors may agree to freeze or reduce interest and charges — though this is not guaranteed and is at each creditor’s discretion.
5. The plan continues until all included debts are repaid in full, or until you change to another arrangement.

Who a DMP May Suit

A DMP may be appropriate if you:

• Have multiple unsecured debts (credit cards, personal loans, overdrafts) that you can no longer manage at their current repayment levels
• Have a regular income that allows a meaningful, if reduced, monthly payment
• Do not want to use a formal insolvency procedure such as an IVA or bankruptcy
• Want a flexible arrangement that you can exit without legal consequences

Free vs Fee-Charging DMP Providers

It is important that you understand the difference, as this affects how much of your monthly payment actually reaches your creditors.

No-charge providers (debt charities)

These organisations offer DMPs at no cost to you. Every penny goes to your creditors:

• StepChange Debt Charity — 0800 138 1111 | stepchange.org
• National Debtline — 0808 808 4000 | nationaldebtline.org
• Citizens Advice — citizensadvice.org.uk

We will always tell you about these options. You should consider them before deciding on any fee-charging service.

Fee-charging providers

Some commercial firms charge fees for DMP administration — typically taken from your monthly payment before distribution to creditors. This means it takes longer to repay your debts. Any fees must be clearly explained to you before you commit, including the total cost and how fees are deducted.

Key Considerations

• Credit rating: A DMP is likely to have a negative impact on your credit file. Creditors may register missed or reduced payments as defaults, which remain for 6 years.
• No legal protection: Creditors are not legally bound to accept reduced payments or to freeze interest. They retain the right to pursue legal action.
• Duration: Because debts are repaid in full at a reduced rate, a DMP can last many years.
• Priority debts: Council tax, rent arrears, mortgage payments, and utility bills should be paid before unsecured creditors. A DMP covers unsecured debts only.

Alternatives to Consider

Depending on your circumstances, other solutions may be more appropriate. Our advisers will explain all options, including IVAs, DROs, and bankruptcy, so you can make a fully informed choice.