21 Aug 2019

Debt management plan (DMP)

A Debt Management Plan (DMP) allows you to pay off your debts at a rate you can afford. Find out more about how it works and which debts you can use it for. You can also talk to a free debt adviser about whether it’s the best way to pay off or clear your debts.

How a Debt Management Plan works

A Debt Management Plan (DMP) might be for you if you have non-priority debts like credit or store cards, overdrafts or personal loans.

Your DMP provider will help you work out an affordable payment and talk to your creditors.

You usually need to have at least £5 or more to pay to each of your creditors, although this amount can vary between providers.

You make one monthly payment to the DMP provider who then pays your creditors for you.

Which debts can I pay off with a Debt Management Plan?

You can only use a Debt Management Plan for non-priority debts.

These include:

  • overdrafts
  • personal loans
  • bank or building society loans
  • money borrowed from friends or family
  • credit card, store card debts or payday loans
  • catalogue, home credit or in-store credit debts.

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.

Who offers Debt Management Plans?

Many free debt advice organisations can help you decide if a DMP is right for you and some can also arrange a plan to ensure that all the money you pay into it goes towards paying off your debts.

If you choose a fee-paying provider, it’s important to know that all DMP providers must be authorised by the Financial Conduct Authority (FCA) to ensure they meet agreed standards.

Before you agree to take out a plan with a fee-paying provider, check they have been authorised.

Get free debt advice about a Debt Management Plan

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

This is because the debt solution which is best for you depends on your personal circumstances and might not be this one.

Debt advisers can help you make the right decisions, which means you might be debt free sooner than you thought.

A debt adviser will:

  • treat everything you say in confidence
  • never judge you or make you feel bad about your situation
  • suggest ways of dealing with debts that you might not know about
  • check you have applied for all the benefits and entitlements available to you
  • always make sure you are comfortable with your decision.

Three quarters of people who get debt advice feel more in control of their finances afterwards.

 
 

This article is provided by the Money Advice Service.

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