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The Debt Management Plan (DMP) replaces the normal repayment schedule until either the debtor is able to re-establish the full monthly repayments or the debt is repaid in full through the DMP. It is because of the reduced payments and possible added interest that DMP's will extend the time it takes to repay the debts, and therefore should only be considered a short term debt solution.
A DMP will, however, allow the debtor to protect their assets, and because a DMP is an informal agreement, the debtor is not obliged to inform the creditors of any property or assets they may own.
DMP Process
- Only applies to unsecured debt.
- A complete Income/Expenditure is drawn up on the client to identify what disposable income is available.
- Submit proposal for creditors to approve reduced monthly payment.
- Once approved creditors asked to freeze interest. This is at the discretion of the creditors.
- Should be considered as a short term debt solution.
- Is an Informal agreement.
Advantages to a DMP
- Monthly payment is affordable.
- Releases immediate pressure from creditors.
- Someone else communicates and negiotiates with your creditors.
- Allows time for another solution/process to be identified.
- Your debt management company are known & trusted partners and will negotiate with your creditors to put a stop to the continuing application of interest and charges to your account. Our debt management counsellors are recognised industry specialists with a long history of dealing with creditors.
- With this kind of plan you commit to paying back what you can afford every month leaving you enough money to pay essential bills and living costs.
- A debt management plan is often the simplest route to take because you simply make one payment to service all of your debt needs which will be fully managed by your counsellor. You will also get the full support of your debt management service throughout the process.
DMP Disadvantages
- Repaying a large amount of debt by this method will take a long time.
- Although your debt management counsellor can get the agreement of creditors to accept your repayment offer, this kind of solution is an informal arrangement, so there is no legal protection.
- None of the debt is written off.
- The chasing of the debt by the lender can continue.
- On acceptance of the lower payment the account(s) are put into default.
Do I qualify to take out a debt management plan?
Everyone is in a different situation and a debt management plan will work better for some people than for others. In general terms this may be a good solution for you to use to eradicate your debts if you:
- Are having problems paying your unsecured debts.
- Don’t qualify for an alternative solution such as an IVA as you don’t owe enough (i.e. your debts total less than £15,000).
- Don’t owe money to more than a few creditors.
- Want to sort out your debts in a confidential manner with minimal impact on your life and financial situation.
Debt Helpline UK 07956 210422 
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