What is a Debt Management Plan? (DMP)
A Debt Management Plan is an informal agreement between you and your creditors to pay back your debts at a rate you can afford.
Review your income and expenditure to work out what you can realistically afford to repay each month. This reduced monthly repayment amount will be proposed to each of your creditors and if accepted, your debts will be repaid at this rate over an extended period.
Is a Debt Management Plan right for me?
If you’re struggling to make your monthly payments but have a stable enough income to make consistent, smaller repayments over an extended period, then a DMP could be right for you.
When should I consider a Debt Management Plan?
If you are:
- Worrying about money
- Struggling to pay your household bills
- Relying on your overdraft or credit card
- Missing repayments or getting into arrears
It could be worth speaking to a regulated debt advice company about a DMP.
What debts does a Debt Management Plan cover?
A DMP is specifically for non-priority debts. These include:
- Credit cards
- Store cards
- Payday loans
- Bank loans
- Buy now, pay later debts
Debt Management Plan pros & cons
- Reduced monthly repayments
- Creditors can freeze interest and charges on your debts
- DMPs aren’t recorded on a public register
- You should receive less contact from your creditors
- You’re still liable for your full debt
- Creditors can still take legal action
- There are no guarantees that the creditors will accept offers
- Your creditors aren’t obligated to cease contact
How to apply for a Debt Management Plan
If you want to apply for a DMP or find out what other solutions could be available, get in touch and we’ll:
- Review your current debts and financial situation, then give you expert advice on what solutions are available.
- If you chose a solution managed by MoneyPlus Advice, we’ll send you your paperwork and guide you through the setup process.
- We’ll contact your creditors to negotiate repayment amounts and freeze interest and charges on your behalf.
Are you eligible for a Debt Management Plan?
You will need to be a UK resident, and you’ll also need:
- At least £100 in disposable income each month
- At least £2,000 in unsecured debt
- At least 2 unsecured debts
What debts aren’t covered in a Debt Management Plan?
Not all debts can be included in a Debt Management Plan, some types of debt that won’t be included are:
- Council tax
- Income tax
- Court fines
- National insurance
- TV license
- Utility bills
- Priority bill arrears
Living with a Debt Management Plan
A Debt Management Plan gets to work almost immediately, meaning that once you have considered your budget, you can begin making your new manageable payments right away.
It’s worth noting that creditors can still contact you and may continue to request payments. If your plan is managed by MoneyPlus Advice, you can refer any creditor contact to us, and you won’t need to reply.
It’s also important to remember that a Debt Management Plan will impact your credit score for the time the plan is in place, and 6 years after that.
See some of our real-life success stories
Melanie was £22,000 in debt
She had multiple debts including credit cards, loans, catalogues & buy-now-pay-later debts.
Before entering a DMP, her monthly payments were
As a MoneyPlus Advice customer, she now pays
🎉 That’s a payment reduction of £606!
How a Debt Management Plan affects mortgages & renting
Having a DMP in place can make it difficult to get a mortgage. Making reduced payments towards your debts will show on your credit file, and this may be used against you in a mortgage application.
Similarly, it can be difficult to remortgage your existing home on a DMP, though there are options depending on the length of your current plan. If your mortgage plan expires, your current lender will likely offer their standard variable rate. While not the best deal, it will allow you to continue making repayments.
If you keep your rent payments up-to-date and pay off any rental debts that you may have, then a DMP shouldn’t affect your current tenancy.
Can a Debt Management Plan protect me against bailiffs?
While a Debt Management Plan cannot guarantee that bailiffs will no longer come to your door, having an agreed repayment plan in place could help keep your assets safe.
As bailiffs are typically a last resort for lenders, setting up a Debt Management Plan is usually an indication that you plan to repay your debts, and should reduce the risk of legal force.
“It’s made a big difference to me and how I live.“— Helen, Aberdeenshire
Read Helen’s story…
How long does a Debt Management Plan last?
This depends on your monthly repayment amount, interest and charges (if applicable), and your personal circumstances. The actual amount of time your Plan will last could change if your personal circumstances change.
For example, if your income increases, you could increase your payments and reduce the length of your Plan. However, if something changes and you need to reduce your payments, this will extend the length of the Plan.
Can you pay off your Debt Management Plan early?
DMPs are quite flexible, so you may find that you’re able to pay it off earlier by increasing your monthly payments or paying a lump sum.
If your personal circumstances change and you find yourself coming into money, our internal Settlements Team can help you to get an early settlement figure, which could see you settle your debt for less.
What’s the difference between a DMP and an IVA?
Both an Individual Voluntary Arrangement (IVA) and a Debt Management Plan (DMP) are solutions for those who are struggling with unmanageable debt, both involve making reduced, affordable monthly payments to your creditors as part of an agreed plan.
The biggest difference between the two solutions is that an IVA is legally binding and a DMP is not. With an IVA, once your creditors have agreed to the terms, they won’t be able to take legal action against you (such as petitioning to make you bankrupt, or other court action). They will also be unable to contact you directly – they’ll need to communicate through the licensed Insolvency Practitioner (IP) who is dealing with your case. IVAs also allow you to write off some of your debt, unlike DMPs.
DMPs are not legally binding, so your creditors can still take action against you if you do not keep up with your monthly plan repayments. They are also still free to contact you, however, if you’re using an FCA-regulated Debt Management company such as MoneyPlus Advice, we’ll be sure to help with any creditor contact you receive.
Can you take out credit while on a Debt Management Plan?
Taking out further credit while on a DMP would impact your monthly expenditure, and could make repayments unaffordable.
When starting a DMP, our expert Advisors will help you to set up a realistic monthly budget, which will account for all regular, day-to-day costs that are likely to pop up. We’ll make sure you are left with enough money to cover all of your daily expenses, reducing the need to borrow money.
If you do need to take out a new credit agreement, the lender will run a credit check. Due to the impact on your credit file of making reduced payments, you may be charged a higher interest rate for the credit you take out, or refused credit altogether.
Can you get car finance on a Debt Management Plan?
Whilst there are some car finance companies that accept those on DMPs, you may find that you’re seen as a higher risk by most.
How it works.
We try to make your life as easy as possible, so we do as much of the work for you as we can. If you qualify here’s what happens when you get in touch:
Speak to us.
Tell us about your finances and the debts you’re having problems with.
Find a solution.
Based on your circumstances we’ll build a plan to get you out of debt, whether that’s with us, or not.
Choose your plan.
We’ll either contact your creditors and tell them you’re with MoneyPlus, or make sure that you know who can help.
Are you struggling with debt?
There are always solutions, no matter what your situation.
Alternative debt solutions that can help
There are a number of debt solutions available and you can find more information on all of the below solutions on our website.
Individual Voluntary Arrangement (IVA)
An Individual Voluntary Arrangement (IVA) is a form of insolvency that allows you to write off up to 80% of your debt as an alternative to bankruptcy. It’s a formal solution that can reduce your monthly repayments.
Debt Relief Order (DRO)
A DRO is an alternative to bankruptcy for people with debts of less than £30,000 (£20,000 in Northern Ireland) and less than £75 a month in disposable income.
Protected Trust Deed
A formal debt solution, for residents of Scotland, that’s intended to remove the pressure of unmanageable debts, by combining them into a single monthly payment.
Debt Consolidation Loan
Pay off all of your unsecured debts with one debt consolidation loan and make one monthly payment, rather than multiple payments to creditors.
For free and impartial money advice and guidance, visit MoneyHelper.
Still unsure or want to know more?
That’s where our advisors come in, our expert debt advice team can help you find a solution that works for you.
At MoneyPlus we understand that every financial situation is different, and approach every customer with the care and individuality that they deserve.
So, get in touch today and start living better with MoneyPlus Advice.