Dealing With Debts, Options Explained

d) Debt Management Plan (DMP)

A Debt Management Plan (DMP) is an informal arrangement where the debtor makes pro-rata or token offers to non-priority debts after making arrangements and paying priority creditors. In a nutshell, this involves seeing how much money you have left (if any) to go towards paying your non-priority debts after you have covered your essential living expenses such as mortgage / rent / council tax / food / utility bills etc

Some pros

recognised / fair procedure for dealing with debts
flexible procedure / solution if there is a change in circumstances (higher or lower offers depending on whether disposable income improves or worsens)
can be implemented & administered by the debtor themselves via self help and assisted methods
creditors may consider part or full balance write off after a period of time, if the debtor has made every effort to pay back what they can / maintained regular payments / have serious health problems with circumstances unlikely to improve

Some cons

no guarantees that creditors will agree to the proposals / offers (although they should not refuse payments made to them)
creditors may not freeze interest and charges or could re-instate them, which in turn could mean debts actually increase even though payments are being made
accounts may be passed to external internal collection departments or external debt collection agencies resulting in letters / telephone calls / threatened or actual home visits
accounts defaulted / damaged credit ratings
creditors could still take legal action - for example obtain a court judgement (CCJ) which in turn may lead to an application for a Charging Order if there is a property involved
long or unrealistic timescale to clear debts

A Debt Management Plan (DMP) can be used as a short or long term option / solution depending on circumstances and / or other possible future long term solutions.

A debtor could administer a Debt Management Plan (DMP) themselves or use a charity such as CAB / Consumer Credit Counselling Service.

There are also numerous fee charging Debt Management businesses & companies offering this type of service. If you do decide to use one of these businesses or companies, we would strongly advise that you check the terms, conditions, fees (including up front ones) and any hidden charges as there is evidence of misleading advice in this sector.

FREE DEBT MANAGEMENT PLAN

This guide includes a Debt Management Plan designed by North East Derbyshire CAB to allow and assist YOU deal with your debts.

Useful Links

Consumer Credit Counselling Service
0800 138 1111
National Debtline
0808 808 4000
Court Judgements Information

Next: Debt Relief Order (DRO)