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Debt Management Plan

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A debt management plan, also known as a DMP, is an informal solution designed to reduce your monthly payments towards your debts.


What is a debt management plan?

This is where either you or a third party negotiate lower monthly payments to your creditors. It isn’t legally binding, unlike other debt solutions, such as an individual voluntary arrangement (IVA) or a trust deed.

Your payments are proposed based on what you can reasonably afford. This is worked out through a breakdown of your monthly budget and the payments are usually paid over a longer period.

Payments can also be revised if your circumstances change, making this solution flexible.

Unlike some debt solutions, you’ll repay your debt in full. Your creditors may also agree to freeze interest and fees on the debts included, but this is not guaranteed.

If you opt to go for a private debt management company, they will charge you a fee for negotiating and administering your DMP. However, there are some debt charities that offer the service for free.

If your creditors agree to the reduced payments offered, all you need to do is keep up with your payments.

Am I eligible for a debt management plan?

There’s no maximum or minimum debt level needed to enter a DMP, but there are some things to consider before applying.

A DMP is good for those who are struggling to keep up with their debt repayments, but who can afford to consistently pay smaller amounts over a longer period of time.

It’s also good for those whose circumstances are likely to improve over time and who have a steady and relatively stable income.

Before applying for a DMP, you should be sure that you will still be able to pay your priority bills, such as your mortgage/rent and council tax.

What debts can be included in a DMP?

Not all debts can be included in a DMP; it’s designed to help with non-priority debts. Debts suitable for this solution include:

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


Debts that are unsuitable for a DMP include:

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

What are the advantages of a debt management plan?

  • As it is an informal solution, your DMP won’t be recorded on an insolvency register.
  • A DMP shows you are willing to pay your debt in full, so your creditors will look at this more favourably.
  • Creditors can freeze interest and charges on your debts.
  • For the most part, DMPs are flexible – allowing changes to be made if your situation changes.
  • They reduce your monthly payments to your debts.
  • You can have less contact with your creditors if you opt to use a third party as they will deal with them on your behalf.

What are the disadvantages of a debt management plan?

  • It can take you a long time to pay back your debt.
  • It’s not guaranteed that your creditors will freeze interest and charges.
  • You are still liable for your full debt level.
  • It isn’t guaranteed that your creditors will accept the offer of reduced payments.
  • Creditors can still take legal action against you.
  • Your creditors are not obligated to stop contacting you, unlike other debt solutions such as an IVA or trust deed.
  • Some private DMP providers will charge fees for the service, which can extend the length of the plan.
  • Your credit score could be negatively impacted, making getting further credit more difficult and expensive.

How does a debt management plan work?

The exact nature of a debt management plan varies from case to case, but you can expect its course to follow these steps:

Select your DMP provider

You can negotiate a DMP with your creditors yourself if you choose not to use a third party.

If you opt to use a DMP company, an advisor will represent your interests, and remove the stress of direct contact with creditors. A number of debt charities offer DMP services free of charge.

Work out your budget

Next, you must work out how much you can afford to pay in your monthly instalments, by carefully analysing your budget.

If you chose to use a DMP provider, this will involve providing payslips, bills, and other documents, so that the amount you can afford to pay after essential costs can be calculated.

Submit a suggestion to creditors

Your budget will then be shown to your creditors, who will decide whether or not to accept your new monthly payments. If they accept, they may also agree to freeze ongoing interest and/or charges as a gesture of goodwill.

If your creditors do not accept the new payment plan, you may be eligible for an alternative solution, such as a trust deed or individual voluntary arrangement, bankruptcy or sequestration.

Make your new monthly payments

If your creditors agree to your new reduced payments, the final step is simply to keep up with them.

If you chose to use a DMP provider, you will make your monthly payment to them rather than directly to your creditors.

This means you have only one payment rather than several, which can make things much more manageable.

Frequently asked questions.

Need more info? Here are a few of our most frequently asked questions on this topic. If you don’t see the answer you’re looking for here, give us a ring – we’d love to help.


Your credit score will be affected by a DMP as it’s likely you’ll be paying less than the minimum payment amount detailed in your original credit agreement. While it isn’t always noted on your report, it can be flagged on it that your debts are being paid through the DMP.

You’ll find it difficult to apply for a mortgage or other form of finance while you’re in a DMP because of the affect it will have on your credit score. Once you’ve completed the plan and your debts have been cleared, this will become easier as your score will slowly improve.

Yes, it’s never guaranteed that the companies you’re in debt to will agree to your DMP offer. It’s also not guaranteed that they will freeze or reduce interest and charges, although declining is rare.

If you miss payments to your arrangement, the companies included may decide that they no longer agree to the DMP. If you find that you’re struggling to make payments to your DMP, you must contact your provider straight away.

As this solution is informal, there is nothing to legally say you have to include all your debts in a DMP. However, if you choose to leave out some debts and continue paying them yourself, it may affect the chances of the other companies agreeing to the plan.