Debt Management Plan (DMP)

A DMP is an agreement between you and your creditors to pay off all your debts. You make regular payments to a licensed debt management company such as Refresh Debt Advice.

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This Guide Includes

1. What is a Debt Management Plan?

2. Advantages of a DMP

3. Disadvantages of a DMP

4. Debts that can be included in a DMP

5. Am I eligible?

6. Is my home at risk?

7. DMP Advice


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What is a Debt Management Plan?

A Debt Management Plan, also known as a DMP, is an informal solution designed to reduce your monthly payments towards multiple debts.

A Debt Management Plan is administered by a licensed Debt Management Company that will negotiate an affordable payment plan with creditors. Once an agreement has been reached with your creditors, you make one monthly payment, which is then distributed equally to your creditors by your Debt Management company.

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A Debt Management Plan (DMP) is for people who have a bit of extra money left over each month after paying basic living costs. If you can pay your priority debts such as mortgage, rent and council tax but are struggling with paying off non-priority debts like credit cards and store cards, then a DMP may suit you.

Before you apply for any debt solution you should consider the advantages and disadvantages of the solution and how these may impact you. Our experts will be more than happy to walk you through these and explain them in detail.

If you are interested in finding out more about debt management plans, Call 0800 121 48 63 or complete the online form by clicking on the “Get Debt Help” link above.

The Advantages of a Debt Management Plan

  • 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 an agreement with your creditors a DMP may suspend actions against you such as County Court Judgments (CCJs).
  • In many cases, creditors may freeze interest or charges.
  • Your monthly debt repayments may be reduced.
  • There is no limit to the number of creditors the plan can cover.
  • Many creditors will freeze the interest on credit agreements and stop any penalty charges while you are making payments through the debt management plan (DMP).
  • You can have peace of mind knowing that your debts are being repaid

The Disadvantages of a Debt Management Plan

  • Creditors including bailiffs, have the right to continue action
  • Your creditors are not obliged to accept 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 it will take a much longer period to repay your debts.
  • Creditors are not obliged to freeze interest or charges.
  • Your home and other assets of value are not protected from creditors.
  • Debt management plans (DMP) will only cover non-priority unsecured debts, so you will need to ensure that your secured loans such as mortgages are covered.

Debts that can be included in a Debt Management Plan

A Debt management plan (DMP) can only be used to pay off non-priority unsecured debts such as;

  • personal loans
  • credit cards
  • catalogue accounts
  • store cards

You cannot use a DMP for a secured loan such as a mortgage.

Who is eligible for a Debt Management Plan?

In order to qualify for a Debt Management Plan (DMP) you need to fulfil certain criteria:

  • You must be in debt to at least two different creditors for a debt management plan (DMP) to be an option.
  • The debt must be more than £2,500 in unsecured loans to be considered for a debt management plan (DMP).
  • Your disposable monthly income must be at least £80 and your contractual payment must be higher than your disposable monthly income to realistically afford a debt management plan (DMP).

Even if you have a poor credit rating, you should be allowed to have a debt management plan (DMP), as long as you fit the profile above.

Is my home at risk if I take out a Debt Management Plan?

If you enter a Debt Management Plan (DMP) you can only include your unsecured debts. Secured debts such as your mortgage cannot be included. After you start your Plan you must continue paying your mortgage to make sure you do not put your property at risk.

Debt Management Plan Advice

If after reading this you think that a Debt Management Plan (DMP) would be the right sort of debt repayment plan for you, get in contact with Refresh Debt Advice to discuss your options. One of our expert advisers will look at your income, assets, debts, and creditors, which they will review with you, helping you to work out what money you have coming in and going out so that you can agree on an affordable monthly repayment amount to manage your debts.

Call now on 0800 121 48 63 or use the contact form on this page to request a call-back from a debt management expert.

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