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Debt Management Plan (DMP) Debt Solution

Summary: A DMP is simply an agreement between creditors and debtors to repay debts that have become unaffordable, in a structured and fair way. This can be decided upon through the court, but individual debtors can approach their creditors to see if they can come to an arrangement directly with the creditor(s) - effectively setting up their own DMP's.

What is Debt Management Plan (DMP)?

A debt management plan is an informal way of reducing your monthly debt repayments. You will repay your total debt back to your creditors but it is flexible payment plan and will allow you to avoid more severe options such as IVA and Bankruptcy. Creditors usually freeze interest to 0% and stop adding charges, but this is not guaranteed.

If you are able to pay your debts back within a reasonable time frame this may be a better option for you than an IVA or bankruptcy. You will not need to declare your assets in this type of plan. For further advice please you should contact a reputable debt solution company to establish if this is the best option for you.

DMP Companies

There are plenty of companies that will do this for you, and who achieve some success through existing relationships with creditors' and expertise that comes through experience. A DMP company will assess a reasonable repayment level based on your income and necessary outgoings to cover all household and personal expenditure. The difference can be offered to the creditors - each creditor being offered their proportionate share of your available income, depending on the size of their debt.

Are there fees?

There are several companies that can assist with a DMP without charging fees (they are funded by the creditors). Others will charge fees - probably something to set up the plan and then a monthly management fee to administer the plan.

When deciding on a company to assist you with your debt management plan it is important to consider using a fee charging company or using a non fee charging company such as The StepChange Debt Charity [formerly CCCS] or Payplan.

The most important aspect of a plan is what is happening to interest and charges, it is vital that the company dealing with your debts works hard to ensure that all interest and charges are stopped.

Check for feedback on forums or on the web before deciding who to go with

What are the benefits?

  • One affordable monthly payment to cover all debts
  • Someone deals with your creditors for you
  • Interest and charges on the debt are usually stopped - meaning you can start repaying the capital owed rather than just servicing the interest
  • Creditors will usually stop any further legal action or hassling for payments
  • Usually a DMP is flexible so it can be ended anytime or the repayment level can be changed.

Are there any disadvantages?

  • The whole debt is being repaid (whereas in bankruptcy and usually an IVA, debt can be written off). It can therefore be a long term plan.
  • If fees are paid then the total cost will be more than the size of the debt (though with interest often frozen the actual savings can be considerable).
  • Your credit rating will be affected -and obtaining further credit during a DMP will be difficult and not advisable. If creditors issue a default notice, this will remain on your credit file for 6 yrs.
  • There are no guarantees that creditors will freeze interest or stop further action (though usually they do).

The above is provided as information only. Iva.co.uk does not provide debt advice. You must always seek professional advice before taking any action to resolve your debts.

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Important Information

IVA.co.uk does not provide debt advice. You must always seek professional advice before taking any action to resolve your debts. If you use the IVA Calculator or call the IVA Helpline, we will pass on your details or connect you to one of our partners who will contact you and explain all the options available to you. With your permission they can connect you with authorised debt solution providers who can process an application for you

IVA.co.uk does not charge you any fees for use of our forum or the IVA Calculator, however we do get paid by our sponsors and the partners we work with. Our partners charge fees and those vary depending on the partner and the debt solution. Customers should refer to our partners' websites for more information regarding their services.

Before entering into any debt solution you should ensure that you have considered the implications. Failure to keep up with repayments can result in bankruptcy or legal action. Lenders are not obliged to accept less in settlement of a debt than they are entitled to or to freeze interest or charges. Not all solutions involve debt write off and some solutions may result in the total amount payable increasing, or the period over which it is to be repaid increasing. Debt solutions will affect your credit rating which records all financial activity for 6 years. Your assets and property could be at risk in some solutions. Conditions apply and each application will be subject to acceptance and eligibility.

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