Debt Management Plan

A Debt Management Plan (DMP) is an informal debt solution that reduces your monthly payments. With a debt management plan, we will work with you to establish a budget that meets your household’s needs. If a debt management plan right for you, we’ll help you set up and manage it.

What is a debt management plan?

This kind of debt solution helps with non-priority debts such as a personal loan or overdraft. You will also have to repay everything you owe using a DMP.

If you’re struggling with debts such as Council Tax, utility bills or child support an Individual Voluntary Arrangement (IVA) could be a better option.

An IVA allows you to stop pressure from people you owe money to, write off up to 90% of unsecured debt and reduce monthly payments using government legislation.

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.

Debt Management plan eligibility

A Debt Management plan could be suitable for you if you owe more than £4,500 and have more than one debt. It could be a good option for anyone who is able to repay their debts in a reasonable amount of time.

You can enter a DMP regardless of the amount of debt you have, however, it’s important to be aware that you cannot include all debts.

You can only use a Debt Management Plan to pay ‘unsecured’ debts, for example, debts that have not held against your property.

Your plan may stop if you do not keep up your repayments.

How do I apply for a debt management plan?

Firstly, you will need to understand how much money you have coming into the household and how much you have going out each month. This is your budget and it will enable you to see how much money you have leftover at the end of the month to pay towards your debts.

We will help to work out how much money you need each month to pay your bills, and other regular costs such as food, transport and hobbies. If there is some money leftover after you have paid all your regular costs, that will go towards paying back your creditors.

One-off bill payment

You make just one payment every month, at the most convenient time for you – for many people this is just after payday. We then use this payment to pay all of your creditors. Read more below if you need help with debt management plans.

Freezing of interests and charges

While we cannot guarantee that interest and charges frozen in all cases, we will talk to your creditors and ask them to freeze interest and charges while you make your repayments.

Pros of a debt management plan

You’ll only pay what you can afford to your creditors after we’ve put together a monthly household budget

If you’ve fallen behind with your household bills you can add the arrears to your debt management plan to help get your accounts back up to date. You’ll still need to make your regular ongoing monthly payments.

You’ll make one monthly payment to us and we’ll manage the payments to your creditors for you

Your debt management plan will undergo a review regularly to make sure you’re paying what you can afford

Cons of a debt management plan

  • Some of your creditors may still contact you
  • Most creditors will agree to reduce or stop interest and charges, but they don’t have to
  • If creditors continue adding interest and charges, this could increase the total amount you currently owe
  • Your creditors don’t have to agree to your reduced payments, but we’ll still send your payments anyway
  • Your creditors may still take further court action against you, such as a County Court judgment (CCJ)
  • Reduced payments may lead to a longer arrangement term and could have a negative impact on your credit file

Can creditors still contact me with a debt management plan in place?

Creditors are still legally allowed to call or write to you during your DMP, but if you maintain your payments, this is likely to reduce over time. However, if you miss any payments, they could start contacting you again.

There are some letters creditors have to send you by law, such as an annual statement or default notice, and these will continue if you’re in a DMP. If a particular creditor is still contacting you a lot, pressuring you to increase your payments or pay them outside the plan, then please let us know so we can help.

Get debt advice

It’s always best to talk things through with an experienced debt adviser before you decide to take out a Debt Management Plan.

Over eight out of ten people who have got debt advice tell us they feel less stressed or anxious and more in control of their life again.

A debt adviser will:

  • treat everything you say in confidence
  • give advice about better ways of managing your money
  • never judge you or make you feel bad about your situation
  • suggest ways of dealing with debts that you might not know about
  • always be happy to talk to you, however small or big your problem is
  • check you have applied for all the benefits and entitlements available to you.

For more information or to discuss a debt management plan and also any other debt options available to you, please get in touch.

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