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Debt Management Plans

For people with financial difficulties one possible solution is to enter into a Debt Management Programme (DMP). Debt Management refers to a situation in which a person in debt seeks the assistance of a third party organisation.

While the Citizens Advice Bureau is sometimes used, the majority of Debt Management Programmes are arranged via a commercial organisation or a debt charity such as Stepchange or National Debtline. Under a DMP the Debt Management Company (DMC) will negotiate with your creditors on your behalf and attempt to reduce your debt repayments to a manageable level. For these services the company will charge a monthly fee along with an initial set up fee.

IVA or Debt Management Plan (DMP) - what is right for me?

The main benefit that Debt Management Programmes have when compared to an Individual Voluntary Arrangement is that they can help a wider range of people. To qualify for an IVA a debt of greater than £6000 is expected meaning that it is a viable option for only a limited number of individuals. Debt Management on the other hand isn't bound by these narrow criteria and so is a more likely option for many seeking to overcome debt.

Before entering into a DMP however you should ask yourself a number of questions -

  • Will the programme mean that your debts are paid off over a fixed and reasonable timescale?
  • Are you being asked to pay anything upfront and how much are your monthly fees?
  • Is there a guarantee that any further interest and legal proceedings will be stopped?

It needs to be remembered that any fees charged by the Debt Management Company will effectively be added to the amount of money you already owe, increasing your debts and potentially the length of time it takes to repay them. Also the informal nature of a DMP means that your creditors are under no legal obligation to commit to the arrangement for the whole period of the debt plan.

If you are looking to overcome your debt problems but you are unsure how best to proceed then contact us. As a group we offer free financial advice to people such as yourself. To speak to one of our advisors either call us on free phone 0800 043 5043 or complete our enquiry form.

Is an IVA right for you

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Total unsecured debt : £4000


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