A Debt Management Plan (DMP) is an agreement between you and your creditors to pay all of your debts.
A DMP is usually used when you can only afford to pay creditors a small amount each month or there is a short-term problem that means that you need a temporary reduction in your debt repayments.
You can arrange a plan through a licensed Debt Management Company, usually for a fee. There are non fee paying companies and charities but you should always ask at the outset how these organisations are funded. If you arrange a DMP with a company you will make monthly payments to the company and the company shares the money out between your creditors, after deducting its fees.
Get a Debt Management Plan
Contact an FCA authorised Debt Management Company. The company will work out your monthly payments. You will have to give details about your financial situation, such as your assets, debts, income and creditors. The company then contacts your creditors and asks them to agree to the plan.
Under a DMP you will pay your debts in full so a longer time period may be necessary. You can ask your creditors to suspend interest and charges, although your creditors do not have to agree to this. A DMP is not legally binding so creditors can still pursue you despite the plan being in place.
Some companies will charge an initial set up fee and a handling fee each time you make a payment. Make sure you understand the costs of your plan and how you pay for it.
Debt Management Plans can only be used to pay ‘unsecured’ debts so any mortgage arrears, court fines, Student Loans have to be paid outside of the DMP. Normally, any debts due to HMRC (including tax credit overpayments) cannot be paid through a DMP.
Your plan can be cancelled if you don’t keep up your repayments.
Call us today to speak with one of our advisors who can help you understand your options and find out the right choice for you. We're here to help on 0800 019 8383.