Debt Management Plan (DMPs)
Are you struggling under the weight of your mounting debts? Are you unsure each month how to get a hold of your spiralling money situation? Is your debt causing stress to your life? If this sounds familiar, then it’s time to face your money worries and to create a strategy to tackle your debt and to reclaim some order back to your finances. One option to help you cope with your existing debt is to think about a Debt Management Plan (DMP).
What is a Debt Management Plan?
A Debt Management Plan is an agreement that is made between you and your creditors to help control and pay all your debts. They will help to reduce your monthly payments and consolidate this into one affordable amount.
DMP can help condense outstanding, unsecured debts over time to help you feel you have regained control of your finances. A DMP is not a legally binding debt solution and won’t appear on any public registers, so nobody needs to know about your DMP unless you tell them.
Types of Debt Management Plans
Debt Management Plans can vary for different levels of debt. If you have a higher amount of debt, this is something that needs careful consideration as it will take a lot longer to pay back your debts. However, if you can pay back an agreed affordable amount each month, it may take some time. Your creditors may agree to freeze interest and charges (but this is not guaranteed) which could reduce the amount you pay back overall.
The amount you may pay back each month will be considered carefully, taking into account your existing household bills so that the payment is within your current means. The amount will also be reviewed regularly to make sure you can still afford your repayments.
There are both free and fee paying debt management plans. Both may appeal for different reasons and you should carefully consider the difference in service you may receive and how long each could take you to repay your debts.
Advantages of Debt Management Plans
- Your monthly household budget will be taken into consideration so you only pay to your creditors what you can afford to pay.
- If you have not been able to pay your household bills, you can get any arrears added to your DMP. However, you will still be expected to cover any further usage with ongoing monthly payments.
- If your circumstances change, the DMP can be amended to ensure you are only making payments which are affordable for you.
- You make one monthly payment which your debt management company will distribute amongst your creditors.
Disadvantages of Debt Management Plans
- Your creditors are not obligated to deduct or altogether halt your interest and additional charges.
- Some of your creditors may still make attempts to correspond with you.
- A DMP does not prevent court action against you. Your creditors can go to court and obtain a County Court Judgement (CCJ) against you.
Which Debts Can I Pay With a DMP?
Debt Management Plan is a debt solution that primarily covers non-priority debts. These include:
- Your Overdrafts
- Your Personal Loans
- Money You Borrowed from Friends and Family
- Bank or Building Society Loans
- Credit Card, Store Card and Payday Loans
- Catalogue, Home Credit or Store Credit Debts
- Arrears with utility companies can be included with DMPs but the client must maintain ongoing payments
Which Debts Can’t I Pay Off With a DMP?
A Debt Management Plan cannot be availed to pay off priority debts such as:
- Gas and electricity for any usage you have after the debt solution is put in place to address your arrears
- TV Licenses
- Court penalties and fines
- Child support
- Council tax
- VAT, National Insurance and Income Tax
- Mortgage
- Rent
- Loans secured against your residence
- Essential hire purchase agreements
How to get a debt management plan?
Please note that there are some factors to bear in mind when choosing a Debt Management Plan. A DMP is not legally binding, therefore your creditors may continue to add interest and charges. This may affect your total repayable amount and impact your credit rating.
Our expert team are on hand to explain the best option available for your current level of debt and circumstances. To understand your options please request a call-back here. To see more information on the Debt Solutions, visit our main debt solutions page here.
Get Debt Solutions from Experts
Money Advisor is committed to providing the best possible service to all those who need help with their finances. If you are struggling to make ends meet or perhaps have experienced a change in circumstances that has affected your ability to manage your finances, please contact us as soon as possible, we will complete a thorough, impartial examination of your individual situation and put you on the road to financial recovery.
