Debt Management Plan

A Debt Management Plan (DMP) is an informal agreement between your creditors and you, to repay your debts at an affordable rate.

After your six-year agreement, you will be debt-free. However, this is not based on the DMP itself, that’s based on how long a default or missed payment can stay on your credit file. The DMP is there to protect you and ensure you’re only paying what you can afford.

An overdraft is not considered a priority debt, and is mostly considered as unsecured. Therefore an overdraft can be included in a DMP. If you don’t include an overdraft in your DMP debts, you can feel free to retain your bank account. However, if you wish to include your overdraft in your DMP, then you will need to open a new bank account with a different provider.

One of the main disadvantages of a DMP is that your creditors will need to agree to it. As creditors usually have a number of other options to get their money back, so getting them to agree to it can be difficult. Additionally you’ll agree to repay 100% of your debt, which could take a significant length of time. Unfortunately, no debts are written off.

A DMP will stop bailiffs, providing they agree to it and don’t chase you for debts (which they actually are entitled to do under a DMP because it’s an informal arrangement). It won’t stop the bailiffs arriving to collect debts that are within the DMP either, such as priority or secured debts.

It’s possible you can still get a CCJ while under a DMP. As it’s an informal agreement, it can be stopped at any time by either you or your creditors. Additionally, some creditors may not accept the terms of your DMP and persue legal action regardless.

There’s no objective measure that letting agents use, and they’ll each have their own criteria for letting out property. Most letting agents will wish to perform a credit reference search and your DMP will appear on there, which may raise a concern on their part. However, a letting agent will use that as only one part of their decision-making process.

A DMP covers 100% of the debts included within it, so your income, expenditure and level of debt will define how long the agreement lasts.

As you’ll be repaying 100% of your debt to your creditors, if you were to come into some money, you can pay the DMP off early via a lump sum payment. Additionally, with the added flexibility of a DMP, if you get a raise at work, you can agree to increase your payments, thus paying it off earlier than originally agreed.

It’s usually set up within a few weeks, and there’s quite a few steps to take in order to get the DMP in process. Your Debt Advisor will explain all of this to you.

At the end of a DMP, your debts that were included will have been cleared off in full. Your credit file will reflect that and the accounts will be marked as closed. However, as you’ve only just settled the accounts, they will remain listed on the credit file for 6 years from the settlement date.

It’s possible to move from an IVA to a DMP, however, before making that decision, you should be aware that an IVA is a legally-binding agreement between you and your debtors. That gives you protection from bailiffs, as well as the creditor not adding charges and interest. If you exit your IVA, your IP will need to inform your creditors and they’ll be able to start chasing you for money you owe, as well as interest and charges.

Creditors, unfortunately, are not legally required to participate in a DMP, there are some that outright refuse, and others that may base a negative decision on their view that they are not getting enough money paid back to them. If your DMP has been rejected, contact us today for further advice.

As a DMP is an informal solution, eligibility criteria is quite loose. However, secured and priority debts can’t be part of a DMP. Utility bills, criminal or court fines and council tax debts, as examples, can’t be included. You must have unsecured, non-priority debts (no others are covered), you must also have a steady and stable form of income, which needs to be sizeable enough for your creditors to accept your terms.

Any secured debts, as well as priority debts cannot be included in your DMP. Examples of priority debt include (but are not limited to) utility bills, court or criminal fines, council tax debts, mortgage repayments or rent arrears, HMRC debts, child support and HP agreements.

Both solutions have positives and negatives and depend on personal circumstances. While a DMP is not legally binding, an IVA is, meaning that under a DMP, creditors can continue to persue legal action. Additionally, because no debt is written off, you’ll have to pay off the whole debt. Where that debt is substantial and your income low, it can take a long time to repay. An IVA also has a timeframe, but provided the IVA does not fail, it should be all completed within 6 years, and any remaining debt written off.

As a DMP is an informal agreement, either you or your creditors can stop the agreement at any time, at which point, your creditors are likely to resume legal action. There is no time limit to a DMP, like there is with an IVA, and they can run longer than 6 years if your level of debt is substantial and income low. Toggle Content

No. In fact, there are some debt you can’t include in your DMP (such as priority debt and secured debts). You may, for example, have a bank account that you don’t wish to change and decide not to include your overdraft in your debts covered by the DMP.

As a DMP is an informal agreement between you and your creditors, it shouldn’t have any affect on your employability. However, it will affect your credit rating, so if you’re working in a position of trust (such as security or finance), then it may be worthwhile to check with your employer.

Only where debts are shared, such as joint debts or financial products. This is known as “Financial Association”. Often, joint debts are on secured finance, such as mortgages, which wouldn’t be covered in a DMP. In the case of joint bank accounts, for example, any reductions in your payments may be reflected in your partner’s debts.

A DMP will appear on your credit file and may affect your ability to get credit. Each lender will have their own criteria for mortgages (and remortgages) so there’s no definitive answer for you, as many factors affect your creidt file.

On a DMP, you do get enough money to live on and nobody tells you how this must be spent. So as long as you repay your DMP obligations as well as any bills you’re currently paying, what’s left over is yours, if you wish to spend this on a holiday, you’re free to.

A DMP doesn’t stop creditors taking action to get you to reduce or repay your debt. They can indeed ask to see your bank statements to ensure you’re not repaying an amount significantly smaller than you could be. During your application process, your debt advisor will also require bank statements, and there’s a legal requirement to review your DMP annually, at which point, you may be asked to provide up-to-date bank statements.