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. does not provide debt advice. You must always seek professional advice before taking any action to resolve your debts.