What is a Debt Management Plan?

27th April 2016

A Debt Management Plan or DMP is a payment strategy agreed between you and your creditors. It enables you to pay back non-priority debts such as credit cards in a manageable way.

Normally, the Debt Management Plan is managed by an agency or DMP provider so you don’t have to deal directly with companies you owe money to. You pay your DMP provider an agreed amount each month and they then divide it between your creditors.

What kind of debts can be paid off with a DMP?

Debt Management Plans aren’t much help if you’re late with your mortgage, rent or council tax. They can only be applied to debts that are considered ‘non-priority’. Non-priority debts might include:

  • Credit cards.
  • Store cards.
  • Personal loans like payday loans or finance agreements.

There are several different types of DMP to choose from and there are a number of non-profit agencies which can give you free advice and assistance. If you decide that a Debt Management Plan is right for you, the one you choose should help you to consolidate your payments and pay off your debt in a reasonable period.

It’s not a fast fix, and there is no guarantee that your creditors will freeze interest. What works for one person may not have the same effect when applied to another person’s debt. Additionally, Debt Management Plans aren’t a catch-all solution so they’re not right for everyone.

Is a DMP the best solution for you?

To help you decide if a Debt Management Plan is for you, you should ask yourself a few basic questions:

1. Do you find yourself able to pay priority bills like your mortgage, council tax and insurance but then find yourself juggling with other payments like credit and store cards each month?

2. Do you find it difficult to talk about your debt with creditors – that is the people you owe the money to? Would you prefer someone else to speak to them for you?

3. Would you find it easier to make one set payment each month rather than making lots of separate payments?

If you answered yes to any of the above, a DMP might be a good choice for you. Before you rush into the nearest plan there are a few details that you should consider.

1. It may take considerably longer to pay off your debt when you are making one smaller payment every month.

2. DMP’s can show up on credit searches and can make it more difficult for you to get credit later.

3. Your creditors are not bound to reduce or freeze your interest so you should go into any plan expecting to pay the amount you owe plus the agreed interest.

4. Although you may want to go ahead with a DMP, not all of your creditors might agree to it and could continue to contact you directly.

5. If you have any doubts about choosing a DMP, you might want to have a look at other available options.

These include Individual Voluntary Arrangements (IVAs), Debt Relief Orders (DROs), and bankruptcy.

Where can you go for advice about debt management?

It’s a good idea to get impartial, professional advice before going ahead with a DMP. Plans are always set up by special companies called Debt Management Companies or DMCs. Many of them charge for their services and fees can vary from company to company.

However, the National Debtline, the Debt Advisory Centre, and the StepChange Debt Charity offer free plans. It can be worth getting advice from these or another independent agency such as the Citizens Advice Bureau. Here is a quick overview of each:

The Citizen’s Advice Bureau

You can find the address of your nearest Citizens Advice Bureau (CAB) at www.citizensadvice.org.uk, if you’d like to talk to someone in person there is a phone service. It is currently being upgraded in England but is fully operational in Wales. Contact the CAB on 03444 111 444 or check contact details using the local Citizens Advice search option if you are in England.

If you live in Wales, you can call the CAB on 03444 77 20 20and TextRelay users should call 03444 111 445. The Citizens Advice Bureau gives up to date information on its web page. You can also start a live online chat with a debt advisor who will answer questions that may help you to come to a decision.

StepChange Debt Charity

Offers debt advice and can help you set up a Debt Management Plan for free, you can find out more at www.stepchange.org. You can also call the StepChange line on 0800 138 1111. Calls are free, including calls from mobiles. There is an online live chat option too, and you can talk to an advisor between 8 a.m. and 8 p.m. Monday to Friday and from 9 a.m. till 2 p.m. on Saturday.

Additionally, the StepChange Charity has a handy Debt Remedy Tool on its home page. It takes approximately 20 minutes to answer a few questions and you will be advised whether or not a DMP might be the right solution for you based on the answers you give.

Debt Advisory Centre

The Debt Advisory Centre has helped over 40,000 manage their debt with DMPs to date. It is a free service and advisors are available to talk online using the ‘live chat’ option or on the phone. The DAC helpline number is 0161 605 4810. Alternatively, you can choose the ‘call back’ option to have an advisor call you immediately or at a time that suits you.

The Debt Advisory Centre has been providing free advice for over 20 years and experienced advisors are able to assess each case individually.

There is a useful tool to help you find out whether a DMP would be right and it takes just 2 minutes to answer a few questions. Your free ‘Money Smart Report’ can help you to decide what the best course of action is. And, of course, the DAC is able to set up a DMP for you free of charge.

National Debtline

The National Debtline is a non-profit charity that can give you impartial advice on every aspect of debt management. Visit www.nationaldebtline.org and download the fact sheet ‘EW 29’ or use the links on the website to find more information on specific aspects of debt management.

You can use the ‘My Money Steps’ tool to get free online help with debt or you can call 0808 808 4000 to talk to an advisor. Calls are free and the service is available from 9 a.m. to 8 p.m. Monday to Friday and from 9.30 a.m. till 1 p.m. on Saturday. Should you decide to go ahead with a DMP, the National Debtline can help you set one up free of charge.

What if I live in Scotland?

You can still get a Debt Management Plan if you live in Scotland. It will allow you to repay your unsecured or low-priority debts in a single monthly payment that will be split between your creditors. Before deciding on the amount you should pay each month, your DMP provider will work out what you need for essential expenses like your mortgage or rent and living costs.

However, a Debt Arrangement Scheme (DAS) might be a better solution if you live in Scotland.

What is a Debt Arrangement Scheme?

A Debt Arrangement Scheme (DAS) is only available to people who are permanent residents of Scotland. Basically, a DAS enables you to pay a lower amount towards your unsecured debt for a longer period of time. This is done through a Debt Payment Plan (DPP) which you will work out with your plan provider beforehand.

Interest and charges are frozen when you have a Debt Arrangement Scheme. The Debt Payment Plan is legally binding so that means that, as long as you keep making your payments on time, your creditors are unable to take any further action against you.

However, a DAS can have a negative impact on your credit rating or score due to the fact that you are making lower repayments each month. Also, your details will be entered into the Debt Arrangement Scheme Register so they will be available to anyone who wants to look.

You can find out about Debt Arrangement Schemes in greater detail by contacting either the National Debtline or the Debt Advisory Centre using the contact details above.

Are Debt Management Plans safe?

If you’re thinking about going ahead with a DMP you may also be wondering if you are protected or if your provider is governed in any way. There are certain rules that all DMP providers have to adhere to.

These were set out by the Financial Conduct Authority or FCA and they apply to any agency or person who is providing debt management services.

These rules apply whether or not the provider charges a fee or provides the service free of charge.

All providers must keep to certain standards and some of the basic points include:

Not misleading you

Providers must provide clear, accurate information and not make wild claims. They can’t say they are working for the government for example or say that their DMP will clear your debt forever.

Fee transparency

If your provider charges for your DMP they must tell you in advance and show you how the fee is applied. They should also point out that it may take you longer to pay your debt as the fee will be added.

Providing you with all the information you need

If you are about to sign a contract with a provider they should have told you everything you need to know by law, including your right to cancel, how long the DMP will last, and how much you will pay in total.

You can find more information on the rules and guidelines that your DMP provider has to follow by visiting the FCA website at www.fca.org.uk.

Making the final decision

For many people, a Debt Management Plan is an effective and smart solution if they can afford to pay at least £5 per month and can pay back existing debt within 10 years. It’s worth quickly reviewing the pros and cons.


  • Your monthly outgoings will be reduced.
  • You only need to make one payment to your DMP provider.
  • Your debt will be paid off in a set time.
  • You may be paying less interest and fewer charges.
  • You’re not tied to a DMP. If your circumstances improve you can opt out and choose a payment plan that is faster.


  • It will take longer to pay off your debt because each creditor is getting less each month.
  • Your credit rating will be affected
  • If you miss a payment your creditors are free to make direct contact with you again

If you’ve taken all these points into consideration and you want to go ahead with a DMP, all that remains is to choose the provider that best suits you.

How to choose a DMP provider

You can find a DMP provider through various channels:

  • Ask your local Citizens Advice Bureau
  • Ask the National Debtline to refer you
  • Search for ‘debt management companies’ on Google
  • Look in the Yellow Pages under ‘debt management’
  • If you’ve already spoken to an adviser, ask them for a recommendation
  • Ask friends who already have a DMP

You should be aware that many DMP providers do charge a fee. However, both the Debt Advisory Centre or the National Debtline will help you to set up a Debt Management Plan free of charge.

The Debt Advisry Centre can help with every step of the process. Experienced advisers are available to guide you through all the ins and outs and they can help you to make the initial decisions. You’ll be shown how to work out what you can pay and the DAC will contact creditors for you and help you to set up a DMP that takes your needs into consideration.

StepChange can also guide you through the process. They will set up a DMP for you, collect payment from you each month and deal with your creditors.

The National Debtline provides a comprehensive service and neither they nor the DMP providers they work with will charge for their services. If you’ve already called NDL and talked with an adviser, just call 0808 808 4000. You can then choose option three and you will be put through to a member of the Referrals Team. They will offer advice and help and can send you a DMP application pack.

A debt management plan can be a great way to get your debt under control and your finances back on track. It’s a flexible option that can be altered to suit your changing circumstances.