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What is a Debt Management Plan?

A Debt Management Plan, sometimes abbreviated to DMP, is an informal solution for dealing with problem debt. In a DMP, your creditors agree to a revised payment plan, which allows you to pay back what you owe in smaller instalments, over a longer period of time. Some creditors might decide to help you clear your debts by freezing fees and interest for the duration of the plan.

How do DMPs work?

There are a few ways to set up a DMP – you could decide to negotiate lower payments with each of your creditors yourself, or you could ask a charity or debt management company to help you. Unless you feel very confident in negotiating for yourself, it is usually a good idea to ask for help from a third party. Struggling with debt can be extremely stressful, which can affect your ability to deal with the problem yourself. By using the services of a third party, not only will you avoid the stress of talking to your creditors directly, but you will also benefit from their years of experience setting up DMPs. An advisor will also help you to work out exactly how much you can afford to pay towards your debts every month.

Once a DMP has been established, you simply continue to make your new monthly payments until your debts are cleared.

Choosing a DMP Provider

Many debt charities will offer to set up and administer DMPs free of charge, but some people might choose to pay a private company to do this. Some private firms argue that they are more likely to look after your personal interests, since they are funded by you rather than outside sources. They might also offer a level of service which it would be unfeasible for a charity to offer. However, it is worth bearing in mind that by going through a debt charity, you are likely to be able to write off your debts more quickly, since every penny you pay goes directly towards clearing your debts rather than paying for administrative fees.

DMP Advantages and Disadvantages

Like any debt solution, DMPs have a number of benefits, but also some drawbacks to consider before you decide whether one is the right solution for you. Below we outline some key advantages and disadvantages to bear in mind.


  • A DMP is an informal debt solution, so your details will not appear on a public insolvency register
  • DMPs do not incur fees if you choose to go through a debt charity
  • Creditors are likely to support your decision to set up a DMP, since it demonstrates your willingness to deal with your debts
  • DMPs allow you to reduce your current monthly repayments
  • DMPs usually reduce the amount of contact you will have with your creditors
  • Most DMPs are fairly flexible, and will allow you to alter your monthly payments should your circumstances change


  • It will usually take longer to clear your debts with a DMP than with a formal solution such as an IVA
  • A DMP does not afford you legal protection from your creditors. It is unlikely, but they could stop the DMP and pursue you for your original payments at any time
  • Although some do, your creditors are not obliged to freeze interest and fees on your debts
  • DMPs can adversely affect your credit rating, making it more difficult to access further credit in the future

When should I choose a DMP?

There are no set eligibility criteria for DMPs, but one is likely to be a good option if:

  • You are struggling with one or more debts
  • You could afford to pay back your debts in their entirety given enough time
  • You have a consistent source of income and could afford to put a reasonable amount towards paying your debts each month

For more advice about which debt solution could be right for you, contact Creditfix on 0808 2085 198.

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