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How much debt do I need to start a debt management plan

How much debt do I need to start a debt management plan

There is no limit to the amount of debt you can include in a Debt Management Plan (DMP). But the total you owe will have a significant impact on whether this could be the right solution for you. 

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What is the minimum amount of debt for a debt management plan?

There is no rule for the minimum amount of debt you need to owe before you can start a debt management plan (DMP). In theory you can use this solution if you owe just a few hundred pounds to a single account. 

The fact that you contact the creditor and negotiate reduce payments with them means that you have created your own DMP.

That said, you would probably not start a formal Plan using a debt management company unless you owe at least £3000-£5000. This is because if you owe less than this, it will usually make more sense to agree a payment plan with your creditors yourself.

There is no minimum debt requirement for a DMP. That said if you want help to set up the Plan, you will normally need to owe at least £3000.

Is there a maximum amount of debt allowed in a DMP?

There is no maximum amount of debt allowed in a Debt Management Plan. It does not matter whether you owe just a few thousand pounds or £100,000 or more. It could still be the right solution for you.

The more important question to ask is actually, how much can you afford to pay into your Plan each month? This figure will determine how long it will last and give you a very good idea as to whether it will be a suitable option for you or not.

Remember, a DMP continues to run until all the debt you owe is paid.

This means if you owe £20,000 and can afford to pay £300/mth your Plan will last just over 5 years. As such it might be a sensible option. However, if you can only pay £100/mth, it will last over 16 years. This is likely to be a problem unless all you need is a short term breathing space because you know your income will improve in the short term.  

If your debt management plan is likely to take longer than 5 years to repay, it may not be a suitable solution for you.

How many debts can be included in the Plan? 

Any number of debts can be added to a debt management plan. Some plans have just 2-3 creditors, others may have 10 or more. The is no rule dictating a minimum or maximum.

However, the number you have, will normally indicate whether you can easily set up the Plan yourself or whether you will need assistance. If you only have one or two accounts, it should not be an issue for you to set up on your own. 

But the more debts you have, the more work you will need to put in negotiating the reduced payments. In addition, it will be much more difficult to keep track of all the payments which have been agreed and ensure they are all paid on time each month.

So if you have multiple debts, it may be best to use a debt management company to assist you. This will mean you only have to make a single monthly payment each month. The rest of the work will be done for you. 

Thinking about starting a debt management plan? For free, confidential advice, call us (0800 044 5407) or complete the form below.

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