Debt Management Plan
Debt Management Plan (DMP)
If you are having trouble paying debts that are beginning to get out of control, then contact IVA4Me for help.
We can help you begin to get your life back on track.
Table of Contents
What Is a Debt Management Plan (DMP)?
A Debt Management Plan is an agreement between you and your creditors to reduce your monthly payments. It isn’t a legally binding agreement but can be negotiated by you or a third party on your behalf. If you use a private debt solution company to negotiate, then they may charge you a fee to do so. It is worth noting that there are several debt charities that may provide this service for free.
Monthly payments are decided based on what you can reasonably afford and usually continue for an extended period of time.
Unlike an IVA or Trust Deed, with a Debt Management Plan, none of the debt will be written off and you will be expected to pay them in full. Once agreed, all you need to do is keep up with the payments until the arrears are cleared.
Whilst a Debt Management Plan is a relatively quick and immediate solution to debt problems, DMPs will negatively affect your credit rating.
How Does a Debt Management Plan (DMP) Work?
Depending on your circumstances and who your creditors are, a Debt Management Plan can vary, but they should roughly follow these steps:
You decide whether to negotiate with the creditor yourself or to nominate a third party to act on your behalf.
Complete a budget and decide how much you can reasonably afford each month. If you use a third party then you may be asked to provide payslips, bills and other documents to help with the calculation of this.
The budget details will be sent to the creditor and they will choose whether or not to agree to the DMP. Once this has been agreed, they may also choose to freeze any interest or charges on your debt.
You then begin to make your new, agreed monthly payments. If you have chosen to use a DMP provider then you will often make one single payment to them and they will distribute it to your creditors.
If your creditors decide against allowing your DMP, then you may be eligible for an IVA, Trust Deed, Bankruptcy or Sequestration.
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Do I Qualify for a DMP (Debt Management Plan)?
There are no definitive conditions for a Debt Management Plan; no minimum or maximum debt amount or number of creditors etc. However, you should consider whether you can afford the new DMP repayments and whether that leaves you with enough breathing room to pay your priority bills.
A Debt Management Plan is especially suitable for people who are going through a temporary issue with their finances but expect an improvement in the near future.
A DMP can include the following types of debt:
Money borrowed from friends/family
It will not be able to include:
Debt Management Plan (DMP) Calculator
A Debt Management Calculator can help individuals to begin to understand the seriousness of their situation. For some, this can mean that they realise that, with some small adjustments to spending, they can clear their debts relatively easily, howver for others, it can signal that they need help.
Take a look at out Debt Help Calculator to see where you stand.
What Are The Advantages of a Debt Management Plan (DMP)?
Your DMP will not be recorded on the Public Insolvency Register
Your creditors will look favourably on your willingness to clear your debts
Creditors may freeze any interest or charges on your debt
This is a flexible agreement, do it can be changed and adapted to meet your needs, as long as the creditor agrees
Your monthly outgoings will be reduced
If you use a third party, they will deal with your creditors on your behalf
What Are the Disadvantages of a Debt Management Plan (DMP)?
It can take a long time to clear your debts
Your creditors may choose not to freeze interest and charges on your debt
Creditors can still contact you or take legal action against you
Some DMP providers will charge a fee
A DMP can negatively affect your credit rating
How To Get Out of Debt
If your debt is getting on top of you then a Debt Management Plan may be a suitable option. However, if you would like to discuss options with someone, contact IVA4Me.If you are struggling with debt and you don’t think you fit the conditions of a DRO, then contact us at IVA4Me for assistance.