A Debt Management Plan (DMP)

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.


  • An opportunity to renegotiate a more affordable repayment to your creditors, you only pay what you can afford
  • The potential to stop interest and other charges being added to your debt therefore preventing your debt from getting any larger
  • Whilst creditors may still write and call you, authority is given to a third party company to contact them instead, and this can often reduce the number of calls and letters you receive
  • A DMP does not affect your credit rating as severely as other insolvency based solutions although any inability of you to meet your contractual payments will be recorded on your credit file


  • This method could potentially take a very long time to repay debts owed. If you are only making a small monthly payment and have a high level of debt, it could take many years to clear your debt with a DMP
  • A DMP isn’t legally binding, so creditors could in theory proceed with court action– CCJ’s, Charging Orders, Enforcement action etc.
  • Debt Management Companies usually charge ongoing fees that relate to the level of monthly contribution, rather like a commission payment
  • A DMP will also have an adverse effect on your credit rating for a prolonged period of time. This is because you are making reduced payments to your creditors and sometimes the contractual terms of the original credit agreement are terminated via a ‘Default’
  • Your credit file will be affected for six years after you have finished making your last DMP payment
  • Your creditors are not obliged in any way to freeze interest and charges which means that your debts may still increase.

How to arrange a Debt Management Plan

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.

Call 0330 400 0481 for a free, no-obligation discussion to decide whether a DMP is an appropriate consideration for you.
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