What is a Debt Management Plan (DMP)?
A Debt Management Plan is an informal agreement between you and your creditors to help you pay off your debts at a rate you can afford
A DMP is structured through one monthly payment to the DMP provider who then pays your creditors for you.
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Who is a DMP suitable for?
A Debt Management Plan (DMP) might be suitable if you have non-priority debts like credit or store cards, overdrafts or personal loans. Your DMP provider will help you work out an affordable payment and talk to your creditors.
You usually need to have at least £5 or more to pay to each of your creditors, although this amount can vary between providers.
Which debts can I pay off with a Debt Management Plan?
You can only use a Debt Management Plan for non-priority debts.
These include:
- overdrafts
- personal loans
- bank or building society loans
- money borrowed from friends or family
- credit card, store card debts or payday loans
- catalogue, home credit or in-store credit debts.
Which debts can’t I pay off with a Debt Management Plan?
You can’t use a Debt Management Plan to pay off priority debts.
These include:
- court fines
- TV Licence
- Council Tax
- gas and electricity bills
- child support and maintenance
- Income Tax, National Insurance and VAT
- mortgage, rent and any loans secured against your home
- hire purchase agreements, if what you’re buying with them is essential.
Who offers Debt Management Plans?
Many free debt advice organisations can help you decide if a DMP is right for you and some can also arrange a plan to ensure that all the money you pay into it goes towards paying off your debts.
If you choose a fee-paying provider, it’s important to know that all DMP providers must be authorised by the Financial Conduct Authority (FCA) to ensure they meet agreed standards.
Before you agree to take out a plan with a fee-paying provider, check they have been authorised using the Financial Services Register on the FCA website