Debt Management Plans
Repay unsecure debts with one regular affordable payment.
Affordable payments
Pay what you can afford each week/month.
One payment
On the day and frequrcy that suits your income.
Interest Potentially stopped
Interest and charges usually stopped or reduced.
Flexible
You may be able to vary your payments if your circumstances change.
What is a Debt Management Plan?
A Debt Management Plan (DMP) is an informal debt repayment solution for unsecured debts.
The companies and/or organisations you owe money to are your creditors. DMPs are provided by debt management companies (DMCs) who negotiate with creditors to get lower repayments and freeze any further interest. The DMP lasts as long as it takes to repay the debts – or until the debts are settled by other means.
How a Debt Management Plan Works
An assessment of your income, outgoings and your debts is made based upon standard expenditure guidelines. This is called a financial statement.
Within this, you are allowed to budget for priority debts. These debts have more serious consequences is not paid such as Council Tax arrears and mortgage repayments and any arrears.
This gives your disposable income which is the money you have left to repay your unsecured debts once you have met normal and reasonable living costs.
You situation is explained to your creditors and an offer of payment is made to each as a percentage of your disposable income depending on how much is owed to each. While any given creditor is not obligated to accept such an offer or stop interest and charges – once hardship has been demonstrated they are normally willing to do so.
Once the DMP has been setup you make regular payments into the plan (weekly /four weekly or monthly) and this is distributed to creditors, less any fees which may be charged.
Debt Management Plan benefits
Once your DMP is up and running, you could benefit from:
Lower payments
Payments are based on what you can afford, not how much you owe.
One payment covers all your debts
You make a single payment into the plan, which is shared out between your creditors.
Interest may be frozen
We ask creditors to freeze interest, but it’s up to each creditor whether they agree, and for how long.
Flexible
Your payments can change as your ability to pay changes. You’re not tied in, and you can leave the plan if you’re able to repay your debts another way.
Insolvency avoided
You reach an agreement with your creditors without needing a formal solution such as an IVA or bankruptcy.
DMP considerations
There are some downsides to entering a DMP:
Impact on your credit rating
The DMP itself doesn’t appear on your credit report. However, because you’re breaking the payment terms of your credit agreements, defaults will be recorded. These stay on your credit report for 6 years, during which you may find it harder to get credit.
Creditors don’t have to agree
Your creditors are not obliged to accept a DMP. The arrangement is informal, so they can change their mind at any time.
Longer to repay
A DMP may reduce your monthly payments, but this usually means it takes longer to repay your debts.
Not all debts can be included
You must keep up any excluded debts and other important commitments yourself. Debts that can’t go into a DMP include child maintenance arrears, current-year council tax, secured loans, your mortgage and mortgage arrears, car finance while you still own the vehicle, court and parking fines, rent arrears, gas and electricity bills with your current supplier, student loans and income tax bills.
How We Can Help
We do not offer Debt Management Plans. However we can assess your situation and advise on your suitability for this and other options.