What is a DMP?
A Debt Management Plan (DMP) is an informal repayment method which allows you to convert numerous outstanding commitments to creditors into one single monthly repayment, based on what you can afford. It can massively reduce creditor pressure as they will be able to see you are making a real effort to settle your debts. However, unlike a Trust Deed or IVA, the agreement is not legally-binding. They are not required by law to do anything.
It is not unusual for creditors to freeze any additional interest and fees on the debt as a good will gesture, but this is not something they are required to do. Creditors can still take legal action against you, although this would be incredibly odd if they see that all your agreed payments are being met.
It is important to remember that a DMP is only an informal payment plan. It can offer some much-needed stress relief, but it will not wipe off any of your debt or give your creditors legal requirements. You will also pay off your debts over a longer period of time, as you are paying less yet still owe the same amount.
Am I eligible for a DMP?
TO qualify for a DMP there are actually very few criteria that you have to comply with. Any amount of debt is eligible, but it can only include unsecured debts. Unsecured debts include the following:
- Payday Loans
- Credit Cards/Store Cards
- Council Tax/Rent Arrears
- HMRC Debts
- Unsecured Personal Bank Loan
- A DMP can transform multiple overwhelming commitments into one reduced manageable monthly payment.
- Creditors may volunteer to freeze any additional fees and relevant interest due to your apparent commitment to paying your outstanding debts.
- Creditors will have less reason to constantly call you and chase you up for payments, and so harassment should be significantly reduced.
- While there are many potential benefits to a DMP, it is an informal agreement. Your creditors are not legally-bound to do anything.
- It requires continual creditor support to be maintained.
- We cannot offer you full protection from your creditors, if they want to make contact with you they still have that option.
- A DMP cannot wipe out any of your debts.
- The agreement can, for better or worse, extend your repayment period.
A stable income that is sufficient to pay back the debts is also required.
How is a DMP set up?
The actual set-up of the repayment schedule is much less stringent in comparison to other formal debt solutions. However, most DMPs tend to work out something like the following:
Step 1: Start by contacting our team who will discuss your options to you in any amount of detail necessary. If we determine that a DMP is the right road to go down, we can work out a proposed budget based on what you can afford.
Step 2: Provided you agree with the budget proposal then we will take it to your creditors. We cannot say for certain whether they will agree, and if they do they might still charge you any relevant fees and interest.
If your proposal is rejected, then we can advise on how is best to move forward from there.
Step 3: If your creditors do accept the proposal then the only thing required of you is to meet the agreed repayments. This will continue until you have repaid everything you owe.
What are the advantages of a DMP?
What are the disadvantages of a DMP?
If you are in need of a debt solution and think you might be eligible for a DMP, or aren’t sure on what you’re eligible for, then pick up the phone today. Our helpful team of debt management experts are ready to assist you in any way they can. Debt can be difficult, so let’s do it together.
Call 0800 505 5124 for more information.