A Debt Management Plan (DMP) is an informal agreement between you and the people you owe money to, where you make one affordable monthly payment that is shared out across your debts. Instead of juggling several payments, you pay a single amount each month — either directly or through a debt management company — and that money is divided between your creditors until the balances are cleared.
A DMP is designed for non-priority debts, such as credit cards, store cards, personal loans and overdrafts. It is flexible and can be changed if your circumstances shift, but because it is informal it is not legally binding on either side. That makes it a useful stepping stone for many people, though it is not always the right long-term answer.
The short answer
- A DMP is one affordable monthly payment shared across your non-priority debts.
- It is informal and flexible — you can change or stop it, and so can your creditors.
- It usually aims to repay your debts in full, so it can take several years.
- Interest and charges may be frozen, but creditors are not obliged to agree.
- Free DMPs are available from charities, so you should never have to pay large upfront fees.
How does a Debt Management Plan work?
The first step is to work out how much you can realistically afford after your essential living costs and priority bills — things like rent or mortgage, council tax and energy. Whatever is left over is your "disposable income", and that becomes your monthly DMP payment.
Your provider then contacts each creditor, proposes the new payment, and asks them to freeze interest and charges. Once everyone is on board, you make a single payment each month and it is distributed proportionally. As your balances fall, the plan is reviewed and adjusted. If your income rises you can pay more and finish sooner; if money gets tight you can ask to pay less.
What debts can a DMP cover?
- Credit and store cards
- Unsecured personal loans
- Overdrafts
- Catalogue and mail-order debts
- Some payday loans
Priority debts — such as mortgage arrears, council tax and court fines — are not usually part of a DMP, because the consequences of not paying them are more serious. If you are wrestling with those, our guide on dealing with your debts yourself is a good place to start.
The advantages of a DMP
- One manageable payment instead of many.
- Reduced pressure, as your provider handles creditor contact.
- Interest and charges are often frozen, so more of your payment clears the debt.
- It is flexible and can be stopped at any time.
- There is no minimum debt level and no formal insolvency on your record.
The drawbacks to weigh up
A DMP is not a magic wand. Because it usually repays your debts in full, it can take a long time — sometimes many years — if your payments are low. Creditors are not legally bound to freeze interest, and a few may continue to add charges or press for more. A DMP can also show on your credit file and may be recorded as accounts not being paid as originally agreed, which can affect your ability to borrow.
DMP or IVA — which is right for you?
The two solutions suit different situations. A DMP tends to work best when your difficulties are temporary and you can realistically clear your balances over time. An IVA may be more appropriate when your debts are larger and repaying them in full is simply not achievable. We compare them side by side in our guide to the main differences between an IVA and a DMP, and you can read more about how formal insolvency works on our debt management and IVA pages.
It is also worth comparing a DMP with borrowing your way out of trouble. Our guide to debt consolidation versus an IVA explains why taking on a new loan is not always the cheaper option it first appears to be.
Getting free help
You never have to pay for debt advice. Free DMPs are offered by charities, and the government-backed MoneyHelper service can point you towards free support. If creditors are still contacting you while you sort things out, our guide on dealing with debt collectors explains your rights.
How IVA Advice Online can help
Everyone's circumstances are different, and a DMP is just one of several routes out of debt. Our advisers can talk through your income, your debts and your goals, and help you understand whether a DMP, an IVA or another option fits best — with no pressure and no judgement. Our advice is always free, and we will only ever tell you about fees if you decide to go ahead with a solution that has them. To talk things through in confidence, get in touch with our team.