What Is a DMP?
A Debt Management Plan (DMP) is a debt repayment scheme that allows you to make one single payment towards all your different creditors according to what you can afford. It can also significantly reduce pressure from creditors as they see you are committed to paying the money back. However, it is not legally binding like a Trust Deed or IVA, it is only an informal agreement. This means they are not legally required to do anything.
Creditors may freeze any additional charges and fees throughout the paying back process, although again they are not legally required to do so. Creditors may stop contacting you as much as they will see progress being made. They are also unprohibited from taking legal action against you, although this is unusual provided all payments are being met.
A DMP is only a payment plan, and while it can offer some significant relief in paying back your debts it cannot wipe any of it off entirely. Since you still owe what was borrowed in full, yet are paying back reduced monthly amounts, your repayment term will be extended.
Am I Eligible for a DMP?
There aren’t many criteria you have to meet to be considered eligible. There is no minimum amount of debt required, although only unsecured debts can be included. These include things like:
- Credit Cards
- Store Cards
- Council Tax Arrears
- Unsecured Personal Bank Loan
- Payday Loans
- HMRC Debts
You must also have a relatively stable income that will allow you to pay back the amount you owe in full.
What Are the Advantages of a DMP?
- It can convert complicated spread out repayments into one, reduced, manageable repayment.
- Creditors may freeze all additional fees and interest due to seeing your commitment to repaying your debts.
- Creditor harassment can be reduced due to progress being made on outstanding debts.
What Are the Disadvantages of a DMP?
- A DMP is an informal agreement and is not legally-binding. It requires ongoing creditor support.
- Creditors may still make contact and have the option of taking legal action against you.
- Your debts will have to be repaid in full.
- A DMP can extend your repayment term significantly.