What is a debt management plan?
A debt management plan (DMP) is an informal agreement between you and your creditors. You work out what you can afford after essential bills, make one payment each month, and a provider shares it out between the people you owe.
Because it is informal, it is not a court process and does not need a creditor vote. It also means the protection is limited.
Who might it suit?
- You have a steady income and a small amount left over each month.
- Your debts are mostly unsecured, such as cards, loans and store accounts.
- You want flexibility to pay more or less as your circumstances change.
What to watch for
- Creditors do not have to freeze interest or stop collection, although many agree to.
- Missed payments can restart creditor action.
- A plan can take many years if payments are low.
- Free providers exist. Be cautious about paying a fee to set one up.
What to do next
Write down your income and essential spending, list every debt, then speak to a free adviser. They can say whether a DMP is the right fit or whether another route would protect you better.