A Debt Management Plan (DMP) is an informal agreement, negotiated by you or a third party, to lower your monthly payments to your creditors based on what you can reasonably afford. It’s not legally binding like an Individual Voluntary Arrangement (IVA) or a Trust Deed.

A DMP can take effect almost immediately. Once you’ve worked out your budget and determined your affordable payment amount, you can start making payments straight away. Creditors need time to review and agree to the plan.

There’s no specific debt level required for a DMP. It’s suitable for those struggling to keep up with repayments but can consistently pay smaller amounts over a longer period. You should be able to pay priority bills like mortgage/rent and council tax.

Suitable debts include:

• Personal loans
• Credit card debt
• Overdrafts
• Bank/building society loans
• Payday loans
• Store cards/credit
• Money borrowed from friends/family

As it is an informal agreement, the debts which can’t be included in a DMP vary dependant on the specific creditor and the DMP provider. Unsuitable debts include:

• Council tax
• Income tax
• Court fines
• National Insurance
• Hire purchase contracts for essential items
• Child support or maintenance
• TV license
• Utility bills

Yes, entering a DMP usually negatively impacts your credit score. Reduced payments show up on your credit report, signalling to lenders that you may have difficulty repaying debts, resulting in a lower credit rating.

• Not recorded on an insolvency register
• Shows willingness to repay debt in full
• Creditors may freeze interest and charges
• Flexible and can change if your situation changes
• Reduces monthly payments
• DMP provider deals with creditors on your behalf

• Must repay debt in full
• Creditors may reject the reduced payments
• Creditors can still take legal action
• Possible contact from creditors during
• DMP
• Some providers charge fees
• Negative impact on credit score

A DMP is suitable if you’re struggling with monthly debt repayments, can’t manage payments to multiple creditors, or prefer a third party to handle creditors on your behalf. It helps consolidate debts into one manageable payment and reduces the monthly amount you are paying out.

Yes, your credit score will be affected as you’ll likely be paying less than the minimum payment amount in your original credit agreement. This can be flagged on your report, indicating difficulties in paying back debts.

It will be difficult to apply for a mortgage or other finance during a DMP due to the impact on your credit score. Once you’ve completed the plan and cleared your debts, your credit score will slowly improve, making it easier to obtain credit.

Yes, creditors can refuse a DMP offer and may not agree to freeze or reduce interest and charges. However, refusals are rare.

Missing payments can lead to creditors refusing to freeze or reduce interest and charges. If you’re struggling to make payments, contact your provider immediately.

No, as the DMP is informal, you don’t have to include all debts. However, excluding some debts may affect the chances of creditors agreeing to the plan. It is usually beat advice to include all of your unsecured debts to ensure that the DMP has the best chance of being accepted by all creditors.