Debt Management Plans

by : Toney casey

A Debt Management Plan is an informal arrangement with creditors where creditors will agree to accept a reduced monthly payment. They will do this for a period of time where financial hardship, which makes it impossible to meet agreed monthly payments, can be shown.

"On entering a DMP you will be required to make one monthly payment to the administrator of the plan. This payment will then be allocated amongst your Creditors in proportion to the amount each is owed."

Advantages of a DMP

A DMP is an excellent way of helping you to deal with debt if you are having difficulty meeting your monthly commitments where, for example:

- Your income has fallen temporarily, or

- Your total debts are less than approximately ?15,000

In the DMP your monthly payments are calculated at an amount you can afford and distributed fairly amongst your creditors in proportion to the amount each is owed.

Disadvantages of a DMP

As a DMP is an informal arrangement, creditors can change their mind during the course of the plan and ask you to pay more to avoid further action being taken against you. They may also continue to add interest and charges to the amount you owe, although they will usually agree not to make charges for at least a short period of time. Some creditors may also decide not to support the plan and may expect you to deal with their debt outside of the DMP.

Also, as it is an informal agreement, you will be required to pay back the full amount owed eventually. This may, depending on the level of your debt and the amount of your monthly payment, take a considerable period of time.


A DMP can be an excellent method of dealing with your debt if your debts are not too high (i.e. under ?15,000) or if you expect your circumstances to change in the foreseeable future. A DMP is not a good solution if your level of debt is high or if you do not anticipate a significant change in your circumstances which will help you deal with your debt. Under such circumstances individuals will usually consider the alternative options of Bankruptcy or an Individual Voluntary Arrangement (IVA).