What Is a Debt Management Plan?

A Debt Management Plan, usually shortened to DMP, is an informal way of repaying certain debts at a rate you can afford.

It can be useful in some circumstances, but it is not suitable for every type of debt.

Which debts can usually go into a DMP?

DMPs are generally used for non-priority unsecured debts such as credit cards, store cards, overdrafts and unsecured personal loans.

Priority debts such as rent, mortgage, Council Tax and energy arrears need to be dealt with separately.

How does a DMP work?

A provider works out an affordable payment based on your budget. You normally make one regular payment to the provider, which distributes money to creditors included in the plan.

The aim is to repay the included debts over time without committing to payments your household cannot sustain.

Is a DMP legally binding?

No. A DMP is an informal arrangement.

Creditors do not have to agree to it and are not automatically required to freeze interest or charges, although they may agree to do so.

How long can a DMP last?

That depends on the amount owed and the payment you can afford. If the payment is low compared with the debt, a plan can last for many years.

Ask for an estimated duration and consider what would happen if your income or essential costs changed.

Are there fees?

Some providers charge fees and some debt-advice organisations can arrange DMPs without charging you a management fee.

Before agreeing, ask how much of your payment will actually reach creditors and compare free options.

What are the main things to consider?

A DMP can affect your credit record and does not provide the same legal protection as a formal insolvency solution.

Get free debt advice comparing it with all realistic alternatives rather than assuming a DMP is automatically the safest choice.

7.52: What Is a Debt Relief Order?

7.55: How Are Debt Management Plans, DROs, IVAs and Bankruptcy Different?

7.56: What Questions Should I Ask Before Agreeing to a Debt Solution?

Important information

This guide provides general information and is not intended to provide financial, benefits, debt, housing or legal advice. Individual circumstances can be different. Check current information from official sources and seek advice from an appropriately qualified or authorised adviser before making important financial decisions.