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.

The following are typical examples of debts that can go into a DMP:

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

There are some debts that would not go into a DMP:

• Secured debts - mortgages /secured loans
• Hire Purchase Agreements (e.g. car)
• Rent and Council Tax arrears
• Student Loans
• Fines / Child maintenance arrears / Tax credit overpayments
• Debts due to fraud or criminal activities

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 may 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. A DMP is an informal arrangement, so provided you keep up your mortgage payments and car HP payments (if appropriate) then these will not be at risk as they can be in formal bankruptcy procedures.

However it should be noted that creditors have the right to apply through the courts to have unsecured debts turned into secured debts against a property (ie your home). This is quite common now as naturally creditors are keen to get back as much of the money as they can. We can help you deal with this if it occurs.

It should be noted that if either your mortgage or car HP payments are very high you should take advice on ways to reduce them as this will help you clear your unsecured debts quicker.

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. The Office of Fair Trading has made it clear that creditors should not turn down any payments made under such an offer.

Whilst creditors do not have to agree, all financial institutions have been advised to look sympathetically on such applications and be prepared to accept offers which are based on sharing the available funds on a pro rata basis.

Note: Whilst creditors may agree to the DMP, they do not have to agree to freeze interest charges. In the majority of cases they do, but there is no guarantee and they are not obliged to. It seems however that common sense prevails in the most part and creditors are keen to support debtors by accepting the regular payments and freezing interest and further charges.

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.

If you choose a DMP to deal with your debts, you need to be clear on why it is best for you. If you are unsure, or think your situation is not going to get any better and the DMP looks like it will last over 10 or 15 years you should have another chat with your debt consultant at Vincent Bond to see what alternatives you have.

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

It is likely that you will be contacted by phone or letter when you miss the normal contractual payments. Just explain that you are in a DMP and that all calls and letters should be directed to Vincent Bond & Co. You must forward all letters to your DMP company, though you can keep your monthly statements from your bank or credit card.

Once your plan is place the creditors will contact you much less as they see the regular payments coming in. However they can call you and you should expect this from time to time.

You will probably receive default notices on some or all of your debts; this is a formal notice that you have broken the contractual agreement which is normal when taking on a DMP. You must forward these to your DMP Company.

You should contact 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.

A DMP is flexible so you are able to change your offers of payment if/when you need to. If you reduce your offer of payment bear in mind that the creditor may not continue to freeze interest if this has been agreed, so it is best to set a realistic monthly payment at the start that you know you can stick to.

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 many creditors do freeze the interest even if it takes a few months whilst they realise you are unable to pay the regular payments. You will find that many of the debts will be passed to third party collection agencies who work very hard to freeze all interest and charges, though again this is not guaranteed.

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. We work for you, not your creditors and will charge an 'initial fee' at the start of the DMP and a 'monthly fee' for each month you are in the plan.
• The initial fee covers the production of a financial statement and proposals for your creditors along with the initial negotiation with creditors by phone, letter and email to set up your agreements for reduced payments. The monthly fee covers the ongoing communication with both creditors and yourselves, continuing active negotiation to reduce interest and charges wherever possible, distribution of your payments, creditor harassment complaints and 6 monthly reviews of your plan.
• The ‘initial fee’ will be the first two payments you make. Note - token payments are made to your creditors from these payments so that good initial contact is made with them.
• The ‘monthly fee’ is 15% of your monthly payment with a minimum of £25 and a maximum of £100.

Your credit file will record missed payments while you are in the DMP as you are not paying the original agreed amounts, so this will affect your ability to get credit. However, you may have already missed payments and actually it is important that you do not borrow any more money during any successful debt plan.

You can rebuild your credit rating once you are debt free and Vincent Bond can advise you on this.

This is a private arrangement between you and your creditors and is not made public in any way. This is one of the reasons people choose a DMP; where they do not want family members, employers or friends to know what happened.