A Debt Management Plan (DMP) is an informal debt solution available in England, Scotland, Wales, and Northern Ireland. It involves making one monthly payment to a debt management provider, who then distributes the money to your creditors. Your payments are based on what you can afford after you’ve covered your essential living costs, and will last for as long as it takes you to repay the included debts in full.
In some cases, creditors may agree to reduce or freeze interest and charges. However, because a DMP isn’t a legally binding debt solution, this isn’t guaranteed, and your creditors don’t have to agree to the plan. This also means that creditors can still take legal action to recover the debt if they wish and may continue to contact you about repayments.
A DMP itself doesn’t appear on your credit file as a separate entry, but the missed or late payments will be recorded and can affect your credit rating. It may be a suitable debt solution for you if you have enough disposable income to make regular payments, but need help managing multiple debts.
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Individual Voluntary Arrangements (IVAs)
An Individual Voluntary Arrangement (IVA) is a formal debt solution available in England, Wales, and Northern Ireland. It allows you to repay your debts through manageable monthly instalments over a set period (typically five years). Once approved, interest and charges on included debts are usually frozen, and creditors generally cannot take legal action against you or contact you to request payment. Any remaining debts included in the IVA will typically be written off once you’ve successfully completed the arrangement.
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Debt Relief Orders (DROs)
A Debt Relief Order (DRO) is a formal debt solution available in England, Wales, and Northern Ireland. It provides protection from creditors for 12 months, during which time interest and charges on included debts are usually frozen, and creditors cannot take enforcement action against you. If your financial situation doesn’t improve after 12 months, included debts will usually be written off.
Need help managing multiple debts?
Our advisors will explain the pros and cons of each option, including any risks, costs, and impact on your credit file, so you can choose the solution that’s right for you.
