Debt Management Plan (DMP)

A debt management plan (DMP) can help you manage your debts by paying them off at a more affordable rate – easing stress, worry and reducing your monthly payments.

Future Strategy can work with you to draw up a plan that meets your family’s needs, with a budget that works for you and what you can reasonably afford.

Importantly, it isn’t legally binding, which differs from other debt solutions, such as an Individual Voluntary Arrangement (IVA).

Our debt management plans can help:

• You only pay what you can afford to your creditors after we’ve put together a monthly household budget.
• If you’ve fallen behind with your household bills, you can add the arrears to your DMP to help get your accounts back up to date. But, of course, you will need to carry on making your regular ongoing monthly payments.
• You’ll make one monthly payment to the DMP, who will manage the payments to your creditors for you.
• We’ll review your DMP regularly to make sure you’re paying what you can afford.
• Give you peace of mind that you are in control of your outgoings.

We’ll work with you to create a budget that works for you and your family. If a DMP’s right for you, we’ll help you set it up. Call our team today to find out how we can help you take back control with a free and confidential initial consultation.

Why choose a debt management plan?

A DMP is a payment arrangement based on the money left over after your household bills and living expenses are covered.

It’s not a consolidation loan, which is a form of credit that you take out to pay off the debt you already have. Instead, you can stop your DMP whenever you like.

The key benefits include:

• Your DMP won’t be recorded on an insolvency register s it is an informal solution.
• A DMP shows you are willing to pay your debt in full, so your creditors will look at this more favourably.
• Creditors can freeze interest and charges on your debts.
• For the most part, DMPs are flexible – allowing changes to be made if your situation changes.
• They reduce your monthly debt payments.
• You can have less contact with your creditors if you opt to use a third party as they will deal with them on your behalf.

If you’re not in ‘unmanageable’ debt at the moment but have several monthly debt payments, you’re struggling with. You can still look into whether a DMP is a good idea for you. Problems such as an overdraft you find difficult to pay off, behind on household bills, or having to rely on a payday loan could be warning signs of a potential future debt problem.

What types of debt can be included?

Debts suitable for a debt management plan include:

• Personal loans.
• Credit card debt.
• Overdrafts.
• Bank/building society loans.
• Payday loans.
• Store cards/credit.
• Money borrowed from friends/family.

Debts that are unsuitable for a DMP include:

• Council tax.
• Income tax.
• Court fines.
• National Insurance.
• Hire purchase contracts for essential items.
• Child support or maintenance.
• TV licence.
• Utility bills.

Will a DMP affect my credit rating?

The short answer is that it is highly likely. This is because a debt management plan will usually affect your credit score, which is used to judge whether you’ll be accepted for credit in the future.

This is because when you start a DMP, you pay less towards your debt each month. Of course, this makes life easier for you, but the reduced payments can signal you’re someone who has difficulty paying back debt.

This often results in a lower credit rating. But it’s worth bearing in mind that if a DMP essentially helps you pay back your debt when you might not otherwise, it’s likely to be your best option still.

Can lenders keep charging fees or adding interest after I start a DMP?

Most creditors understand that adding further interest or charges will only make things worse when you’re in financial difficulties.

How long does it take to set up?

You’ll be able to consolidate debts into one monthly payment almost immediately while reducing the amount you pay each month.

Once you decide your budget and how much you can pay towards your debt, the plan can start immediately.

You don’t have to wait for your creditors to agree to the plan, and the money will be spread evenly among them.

What happens if I miss a payment?

If unexpected circumstances arise and you cannot pay, you may be asked to review your budget to see if a different plan may suit you better, and your payment term may be extended.

If it happens a lot, then the DMP may be cancelled.

Could I be made bankrupt even though I’m on a DMP?

You can only be legally made bankrupt by a creditor if you owe them more than £5,000 in England, Wales, Northern Ireland, or £3,000 in Scotland.

It rarely happens because of the expensive fees to make you bankrupt, which is usually not worth the risk, given the creditor is unlikely to get the money to cover the cost from you.