A first option to consider if you are struggling to pay your debts is a DMP. This allows you breathing space with your monthly outgoings by negotiating an affordable payment plan with all of your unsecured creditors.
If you owe money to more than one creditor and you have a surplus income each month (that is, money left over after you have paid all of your living costs & household bills from your income) then a DMP could be an effective method of repaying your debts over time.
If you are confident that you know what you need to do and have the time, you can attempt to arrange a debt management plan on your own. However you will probably prefer to go through a third party who will look at your debts and based on your income and expenditure, re-negotiate a more affordable rate of repayment for you.
A DMP is an informal arrangement that has to be accepted by your creditors and they will request a review of your financial situation on a regular basis to ensure you are paying them back as much as you reasonably can.
Arrangements of this nature can only be used to deal with your unsecured debts like personal loans, credit cards, bank overdrafts and store cards. Secured debts such as mortgages and hire purchase agreements are excluded.
Tax debts have other considerations, which puts them outside the scope of a normal DMP and require specialised help.
To arrange a debt management plan by yourself, you`ll need to put together a budget plan, showing your lenders how much you earn and your outgoings each month (and therefore how much you have left to put towards your unsecured debts). You`ll then need to negotiate with each lender as to how much you`ll be able to pay them each month.
Alternatively a Debt Management Company will negotiate with lenders on your behalf. They should have experience of setting up plans and handle administration such as phone calls, letters and payment distribution on an ongoing basis.
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