Debt Management Plan

If your debts are adding up, it may be time to consider arranging a debt management plan.

These agreements serve as safety ropes, helping pull you out of danger before the debt becomes unmanageable. Negotiating these types of plans with creditors can be daunting and complicated. You should speak to a debt charity or an FCA authorised Company in relation to a debt management plan.

What’s the difference between an IVA and a DMP?

IVA stands for Individual Voluntary Arrangement, and DMP stands for Debt Management Plan. DMPs are not legally binding. This means that your creditors can still take action against you should you default on your revised payment plan. An IVA is a formal debt solution which prevents the creditors included from taking further action against you.

Is a DMP right for you?

A DMP may be a good option if the following apply to you:

• You can afford the monthly repayments on your priority debts (such as mortgage, rent and council tax) and your living costs, but are struggling to keep up with your credit cards and loans.
• You’d like someone to deal with your creditors for you
• Making one set monthly payment will help you to budget.
• You do not want to consider a formal debt solution.

Joint debts and DMPs

If you have a debt in joint names with someone else, this can be included in your DMP. However, your creditors may still chase the other person for all of the debt. This is because whenever you take out a credit agreement, such as a loan or bank account, with another person, you’re both liable for the full amount of the debt. If both you and your partner are struggling with debts, you might want to consider setting up a joint DMP where you’d both be equally responsible for the repayment plan. It doesn’t matter if you have different levels of income or debts. You can also include debts that are only in one name in a joint DMP.

Will a DMP show up on your credit file?

Your DMP may show up on your credit reference file. Some creditors may ask for a note to be put on your file to say that you have a DMP. This would reduce your chances of getting credit if you applied for it while on your DMP, as it would show you’ve had trouble keeping up with repayments. However, if you kept up with your DMP repayments, the DMP would look better on your credit reference file than unpaid debts or debts that you were only making infrequent payments towards. The note may also stay on your file for a time after the DMP has ended, so you may struggle to get credit for some time afterwards.

If you miss payments this is also recorded on your credit reference file. Even if you’re in a DMP, your creditors may still record that you’ve missed payments, as you’ll be paying less than you agreed to when you took out the original credit agreement. This will mean you could find it harder to get credit while you’re making reduced payments and for some time afterwards.