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Is DMP right for me

Is a Debt Management Plan the right debt solution for you?

If you decide that you want to use a Debt Management Plan (DMP) to resolve your debt problem there is very little to stop you. One of the main reasons for this is that there are no real criteria that you have to meet before you can start one. The Plan is simply an informal agreement with your creditors to reduce the monthly repayments you make to an amount you can afford.

There are no rules governing how much your payments have to be. In addition you do not generally need to take into account any assets you might own such as a property or car. However a DMP is not the best solution for everyone. Whether it is right for you will depend on a number of different factors.

Government Advice about Dealing with Debt

As well as the information found on this website the Government’s Insolvency Service has produced a useful guide to personal debt solutions which you might also find useful: “In Debt – Dealing with your creditors”.

The Money Advice Service (MAS) are an independent service set up by the Government to provide people with free advice about all aspects of personal finances. For help from MAS if you are struggling with debt please follow this link:MAS – Help if you are struggling with debt.

It is also recommended that you read this one page document produced by MAS entitled “Dealing with debt – 5 things you should know”.

Debts included in a Debt Management Plan

You use a Debt Management Plan for reducing payments towards unsecured debts. These are things like credit cards, store cards, bank loans and payday loans. Your mortgage or a car finance agreement are secured debts and these cannot be included in the Plan. In addition there are some unsecured  debts which are difficult to include. These are debts for which a County Court Judgment (CCJ) and or attachment of earnings has already been issued and debts owed to HMRC such as tax or benefits overpayments.

Am I too old to use a Debt Management Plan?

There are no age restrictions to use a Debt Management Plan. The solution can be started by someone of any age. However before you start a Plan you always need to consider how long it will last. You will normally have to continue paying until your debts are paid back in full. This could take a long time if the amount you can afford to pay each month is relatively low. If this means that you are facing repaying your debts long after retirement you should also consider other debt solutions to find out if there is a better option for you.

How much will my Debt Management Plan payments be?

There is no prescribed amount that you have to pay into a Debt Management Plan each month. The amount you pay is based on your surplus or disposable income. This is the amount you have left from your monthly income after all of your reasonable living expenses have been deducted. Because the Plan is an informal solution you are not legally bound to pay all of your surplus income into it each month. However it is important to remember that the more you pay the faster your debts will be paid and the sooner the Plan will come to an end.

The amount of debt needed to start a Debt Management Plan

There is no minimum or maximum amount of debt required to start a Debt Management Plan. It is possible to agree a Plan with your creditors if you owe less than £1000 or many tens of thousands of pounds. A key factor in deciding whether a DMP is suitable is the amount you can afford to repay each month relative to the debt you owe. If based on what you can pay your debt will be repaid in a sensible period of time then the Plan might be a good option for you. However if not and it is likely that you will be repaying your debt for many years a DMP might not be so suitable.

Should I use a Debt Management Plan if Self Employed?

If you are self employed any business debts that you have will normally be owed by you personally. These can be included in a Debt Management Plan. There is nothing to stop you agreeing a Plan which includes suppliers who you owe money to and your bank. However if you have significant Tax or VAT debts it is not normally possible to include these and the Plan may not be suitable. It is also important to remember that after you start a DMP your credit rating will be negatively affected. This will then significantly reduce your ability to use credit to run your business.

Can I use a Debt Management Plan if I live Abroad?

If you have moved abroad but still owe money in the UK which you are struggling to repay a Debt Management Plan could help. There is nothing to stop you negotiating reduced payments with your creditors in the UK yourself or using a debt management service to help you. One of the advantages of the DMP solution is that you can chose to implement it at any time. This means that you can still use this solution if you moved away from the UK a number of years ago.

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