Debt Management Plan (DMP)

A Debt Management Plan (DMP) is an informal debt solution in the UK for individuals facing non-priority, unsecured debts. It streamlines multiple debts into a single, manageable monthly payment, sometimes with reduced interest and charges, providing a structured approach to debt repayment.

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In this guide, we'll examine what Debt Management Plans are, the types of debts eligible for inclusion in a DMP, and how you go about setting up a DMP. Additionally, we'll explore alternative solutions for people dealing with debts they can’t afford to repay.

What is a Debt Management Plan?

A Debt Management Plan (DMP) is an informal agreement designed to help individuals in the UK manage their non-priority debts more effectively. These non-priority debts typically include personal loans, credit card balances, store card debts, and other unsecured financial obligations.

The core concept of a Debt Management Plan revolves around simplifying debt repayment for individuals who may be struggling to meet their financial obligations. Instead of juggling multiple payments to various creditors, a DMP consolidates these debts into one monthly payment.

This monthly payment is based on the individual's financial circumstances, ensuring it remains affordable. In addition, creditors may agree to reduced payments, or freezing interest and charges on your debts, in order to make sure they receive some level of repayment.

How do Debt Management Plans work?

A Debt Management Plan is an informal arrangement, but setting one up typically involves the same key steps. Here’s what you can expect:

Seek debt advice

The journey of a DMP begins by seeking professional debt advice. You can consult with debt advisers who can provide valuable insights and help you determine whether a DMP is the right solution for your financial situation.

Many individuals access free debt advice from debt charities like StepChange, or get expert guidance from a reputable debt advice company.

Pick a DMP provider

Once you've decided that a DMP is the right path, you'll select a DMP provider to facilitate the process. DMP providers are typically organisations or companies that specialise in managing these arrangements. They will become the intermediary between you and your creditors.

Calculate what you can afford to pay towards your debts

Working closely with your chosen DMP provider, you'll calculate what you can reasonably afford to pay towards your debts each month.

This calculation takes into account your income, essential living costs, and other financial obligations. The goal is to set an amount that is manageable while ensuring you can meet your financial responsibilities.

Submit your suggested plan to creditors

With the help of your DMP provider, you'll submit the proposed repayment plan to your creditors. This plan outlines your suggested monthly payments, and may include a request to freeze or reduce interest and charges on your debts. Creditors will review and, hopefully, agree to the plan.

Begin making your monthly payments

Once your creditors accept the proposed DMP, you'll begin making the agreed-upon monthly payment to your DMP provider.

These payments are then distributed to your creditors according to the terms of the arrangement. The DMP provider takes care of this process, ensuring your creditors receive their payments promptly.

Is a DMP suitable for me?

A Debt Management Plan (DMP) may be suitable for you if your financial circumstances align with certain criteria. Generally, DMPs are appropriate for individuals who have the capacity to repay their debts in full if provided with more time and manageable terms.

The appeal of a DMP lies in its simplicity, consolidating multiple debts into a single monthly payment and streamlining the repayment process. To benefit from a DMP, it's essential that you have a stable income and can commit to regular monthly payments within your budget.

To determine if a DMP is suitable for your unique financial situation, seeking professional debt advice is highly recommended. An adviser can evaluate your circumstances and goals,and help you make an informed decision about the best debt solution for your needs.

What debts can be included in a DMP?

Debts eligible for inclusion in a Debt Management Plan (DMP) typically consist of non-priority, unsecured debts - meaning debts not secured against an asset like your home or car. 

Debts covered by a DMP include:

  • Credit card debts
  • Store cards
  • Personal loans
  • Payday loans
  • Overdrafts
  • Utility bills

What debts can't be included in a DMP?

Debt Management Plans (DMPs) are specifically designed to manage non-priority, unsecured debts. DMPs won’t typically address priority debts. Priority debts are those that have a higher level of importance and legal consequences if not paid, and they often include:

  • Mortgage arrears
  • Rent arrears
  • Council tax arrears
  • Child support payments
  • Utility bills
  • Income tax arrears
  • Court fines

Setting up a Debt Management Plan

There are two different ways to go about setting up a DMP, each with their own benefits and challenges:

Negotiating a DMP yourself

In this DIY approach, you can directly negotiate and manage your DMP without involving a third party. 

Negotiating a DMP yourself offers full control over the process and may save you fees associated with DMP providers. However, it requires you to liaise with creditors, negotiate reduced payments, and maintain the plan independently.

Working with a DMP provider

Alternatively, you can opt to collaborate with a DMP provider, which is typically a specialist debt management company. These companies employ people who can handle negotiations, create a tailored DMP, and liaise with your creditors on your behalf. 

While this option may involve fees paid to the provider for their time and management of the arrangement, working with DMP providers can simplify the process and ensure you have access to professional guidance throughout your DMP journey.

Advantages and disadvantages of Debt Management Plans

Every debt solution is different, and each comes with their own unique pros and cons. Below we've laid out some of the key advantages and disadvantages of Debt Management Plans:

Advantages of a Debt Management Plan (DMP)

  • Can reduce monthly payments, making debts more manageable and affordable for individuals
  • Provides an informal approach, avoiding the formalities of bankruptcy or insolvency
  • Offers flexibility to adjust payments as financial circumstances change during the plan
  • Streamlines multiple debts into a single, easy-to-manage monthly payment
  • Engages creditors, often resulting in reduced or frozen interest and charges

Disadvantages of a Debt Management Plan (DMP)

  • No debt write-off, requiring full repayment, which can extend the plan’s duration
  • Will negatively impact credit rating, affecting access to new credit during the plan
  • Informal nature means creditors aren’t legally bound, and some may decline
  • Unpredictable duration, as it depends on individual financial circumstances
  • Potential fees associated with using a DMP provider for assistance and management

Will a DMP be listed on my credit file?

Yes, a Debt Management Plan (DMP) will be listed on your credit file, and therefore will have an impact on your credit rating, which can make it more difficult to access further credit in the future.

When a DMP is reported on your credit file, it shows lenders that you are actively working to manage your debts through a structured plan. While this is a positive for your long-term financial stability, in the short-term it signifies to lenders that you have had trouble dealing with your debts in the past.

The impact on your credit rating will make it difficult for you to do things like open a new bank account, set up a credit agreement, or be accepted for a mortgage, but any reference to your DMP will be removed from your credit file after six years.

How long does a Debt Management Plan last?

A Debt Management Plan (DMP) does not come with a set timeframe or the opportunity to write-off a portion of your total debts. Instead, its duration is determined by the time required to repay your debts in full. 

The plan will continue until all the included debts are completely settled, meaning the exact length is subject to change and dependent on your unique financial situation.

For the DMP to be successful, it's essential to make consistent, monthly payments according to the agreed terms. If you regularly miss payments or fail to meet the plan's requirements, it could lead to the DMP being cancelled. Open communication with your DMP provider and creditors is crucial to the success of a DMP.

Alternatives to a DMP

When deciding whether a DMP is right for you, it's important to explore alternative debt solutions. Here are some alternatives to consider:

Individual Voluntary Arrangement (IVA)

An IVA is a legally-binding agreement between you and your creditors to repay your unsecured debts at a reduced rate over a fixed term, typically five or six years. At the end of the IVA, any remaining included debt is written off, providing a clear path towards financial stability.

Debt Relief Order (DRO)

A DRO is designed for individuals with limited assets and very low income. It allows the individual to stop making payments towards included debts for 12 months. If, after 12 months, the individual still has no way of paying what they owe, the debts will be written off. 

The DRO process is relatively straightforward, however, there are strict criteria you will need to meet in order to qualify.


Bankruptcy is a formal insolvency process where you declare that you owe money you cannot repay. It results in the discharge of all your unsecured debts, offering a fresh start, but it comes with significant financial and legal consequences. This is why bankruptcy should always be considered as a last resort. 

Each of these alternatives has its own advantages and implications, so it's crucial to seek professional debt advice to determine the most suitable debt solution for your specific circumstances and objectives.

Key Takeaways

  • Debt Management Plans (DMPs) help manage non-priority, unsecured debts in the UK
  • They consolidate debts into a single monthly payment based on affordability
  • DMPs require seeking debt advice, picking a provider, and negotiating with creditors
  • They will be listed on your credit file, which will damage your credit rating in the short-term
  • DMPs are informal agreements, which means they’re subject to creditor approval
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