Debt Management

A Debt Management Plan (DMP) is an informal debt restructuring solution for unsecured debt. If you owe money to more than one creditor then a DMP could be right for you.

DMPs are provided by debt management companies or charitable organisations who could negotiate with your creditors to try to get them to accept lower repayments and freeze any further interest that might otherwise be added to your current debt.

Disadvantages of a DMP

  • The arrangements are informal meaning your creditors can change their mind at any time.
  • Your credit rating may still be affected.
  • While such arrangements reduce your monthly repayments to make them affordable it usually means you will pay more in total over a much longer period.
  • Interest will usually continue to be charged on your debts particularly on your arrears which may be charged at higher rates than your original loan rate.
  • Unless your debts are less serious you could end up in debt for a very long time. In the worst case you may find you have no real prospect of getting out of debt and becoming debt free.

Advantages of a DMP

  • One affordable monthly contribution to your creditors
  • Debt management is an informal arrangement that avoids the need for formal insolvency procedures such as an IVA or bankruptcy.
  • By reaching agreement with your creditors a DMP may suspend actions against you such as County Court Judgments (CCJs).
  • Creditors will, in many cases, freeze interest payments.
  • Your monthly debt repayments may be reduced.

Is a DMP right for me?

A DMP can be a good debt solution, especially if your problems are likely to be short term. It may be suitable if you have available income each month once your priority costs have been met e.g. food, accommodation and utility bills.

If this is not the case you may need to consider a formal insolvency solution, such as an IVA, to deal with your debts.

For more information about debt management read our Frequently Asked Questions pages.

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Debt Management

Updated on 2016-10-05T12:34:28+00:00, by Kristian Stock.