Common Questions about  Debt Management Plans (DMP)

• How does a DMP work?
• Which debts can be included in a DMP?
• Can I keep some of my debts out of the DMP?
• How much will I pay each month?
• Is my house safe? Is my car safe?
• Will all my creditors agree to a DMP?
• How long does it last?
• How long does it take to set up an DMP?
• What Happens When I Stop Paying My Creditors?
• What if my circumstances change during the DMP and I cannot make the payments?
• Will the creditors freeze the interest on my debts?
• My bank is a creditor; will I be allowed a bank account?
• How much does the DMP cost?
• What will happen to credit file whilst in DMP?
• Who knows that I have a DMP – is it made public?

A DMP or Debt Management Plan is an informal agreement with your creditors.

It allows someone who is in financial difficulty to reduce the amount they pay to the creditors each month so that the payments fit within an affordable monthly budget.
Using this solution will enable you to start repaying your creditors without having to borrow more and constantly “Rob Peter to pay Paul”.

It is not a legally binding document however and has no fixed term. This means it can last several years as you have to pay back the full amount of your debt.

It can be a useful temporary solution if that is what you need.

Normally any unsecured debts can be included within a DMP.
These include but are not limited to:

• Credit Cards
• Personal Loans
• Catalogue Debts
• Store Cards
• Overdrafts
• Student Loans
• Outstanding balances after home or vehicle repossession
• Business loans for which the client is personally responsible

So which ones cannot be included?

Secured debts such as mortgages and other secured loan repayments including any items on Hire Purchase cannot be included and will be repossessed if repayments can't be made.
Debts such as Rent and Council Tax arrears will normally have to be paid alongside the DMP and provision for the repayment of these debts will be made when the expenses are calculated.
There are other debts that may not be accepted, generally because of irresponsible and reckless actions of the debtor. These might include:

• Any fine or penalties imposed for an offence. Any liabilities arising under an order made in a family or domestic court action such CSA claims for child support
• Any liabilities arising under a confiscation order made under S.1 of the Drug Trafficking Act 1986 0r S.71 of the Criminal Justice Act 1988. 

It is possible to keep certain debts out of the DMP, but not advisable.

As a general rule you should deal with all your creditors equally and not favour one over another. This could lead to problems when negotiating with creditors as they may feel you have not acted reasonably to them.

Furthermore if you are keeping a debt out of the DMP so that you can continue borrowing money (e.g. a credit card) you are just getting further into debt and ultimately will face bankruptcy.

It is better to deal with all the debts in one place and ensure there is enough money left for all household expenses so that further borrowing is not required.

You will only pay what you can afford each month. We will help you calculate this figure when we go through your income and expenses.

Basically you pay what is called your ‘Disposable Income’ – that is the money you have left after you have paid for all your essential and reasonable living costs.

Creditors do have limits to what they accept on spending, as of course they will get less money if you are spending more on living costs, but we will go through these expenses and help you with your monthly budget plan.

Yes. Though if you are spending a very large amount on either a mortgage or a car HP it is likely that you will need to sell these to get your expenditure down to reasonable amounts, otherwise you may eventually end up facing bankruptcy anyway.

You need to budget reasonable and we can help with this.

Usually yes because they are not writing off any debt and can see from the income and expenses provided that you cannot afford any more.

Whilst they do not have to agree, all financial institutions have been advised by the government to look favourably on such applications so as to reduce the potential number of bankruptcies and allow people to repay what they can afford.

There is no time limit on a DMP as the debt is paid in full. This means that it can last several years, but in practice it is a plan that exists until other arrangements can be made or the situation improves so that it is not needed any more.

It is very quick, as there is no consultation period like an IVA. You can have a plan set up in a matter of a few weeks.  

You may get some communication from you creditors, but you can refer them all to your DMP company advisor. You just need to ensure that the one payment is made each month to the DMP company, they will do the rest.

You should keep in touch with the DMP company as soon as you think that your situation is changing for better or worse, they will then advise on what your options are.

The creditors do not have to freeze interest and at first may refuse to do this. Indeed if you have had no problems at all and have missed no payments up to this point then they may not see why they need to.

However eventually most creditors will freeze the interest even if it takes a few months whilst they realise you are unable to pay the regular payments.

You will probably need to open a new bank account and we can help you with this. It is better for you to be able to keep your income separate from all your creditors.

You will need a basic account only that has no overdraft facility. Every bank has a basic account now, so you will be able to get one.

You may be able to get help with an informal debt management programme for free.

However, most companies who provide these services will make a charge. This is normally the first 2 payments that you make and also an ongoing monthly management fee of between 10-15%.

The amount you can afford to pay to your creditors each month is known as “Disposable Income”. This is calculated by taking your total monthly household income and deducting all reasonable living expenses. The money left over is called Disposable Income. This is the amount which is paid to your creditors each month. An informal Debt Management Plan can normally be managed for you so that you are able to make a single affordable monthly payment which will cover all of your creditors.

Your credit file will record missed payments while you are in the DMP as you are not paying the original agreed amounts, but often people who go into a DMP already have a poor credit rating.

There is not much that can be done to prevent this, but one thing at a time; get the debts sorted out then you can look at how to repair your credit rating once you are debt free.

This is a private arrangement and is not made public in any way.