What Is a Debt Management Plan (DMP)?
Last Updated: January 2025
Your complete guide to Debt Management Plans in the UK. Understand how this flexible, informal solution can help you manage your debts.
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Calculate Your DMP PaymentWhat is a DMP?
A Debt Management Plan (DMP) is an informal agreement between you and your creditors to pay back your unsecured debts. It is not a legally binding solution like an IVA or bankruptcy.
With a DMP, you make one single, affordable monthly payment to a DMP provider. They then distribute this money amongst your creditors. The provider will also try to negotiate with your creditors to freeze interest and charges, although this is not guaranteed. You continue making payments until your debts are paid in full.
Informal Agreement
Flexible and not legally binding, so you can stop or change it at any time.
No Fixed Term
The plan continues until your debts are fully repaid, which can take several years.
Single Payment
Consolidates your debt payments into one manageable monthly amount.
How Does a DMP Work?
- Get Debt Advice: A debt advisor will review your finances to see if a DMP is your best option. Free providers include StepChange and Citizens Advice.
- Create a Budget: The advisor helps you create a detailed budget to work out your affordable monthly payment.
- Provider Contacts Creditors: Your DMP provider contacts your creditors with the repayment offer and asks them to freeze interest and charges.
- DMP is Active: You start making your single monthly payment to the provider, who then pays your creditors for you.
- Regular Reviews: Your financial situation is reviewed regularly (usually annually) to ensure the payment is still affordable.
- Completion: The plan ends once all debts included have been paid off in full.
Pros and Cons of a DMP
Advantages
- It's a flexible solution; you can increase payments or stop the plan.
- You make one manageable monthly payment.
- It's not a formal insolvency, so it's less damaging than bankruptcy.
- Free DMPs are available from debt charities.
Disadvantages
- It's not legally binding, so creditors can still take action.
- Creditors do not have to freeze interest and charges.
- It can take much longer to become debt-free than with other solutions.
- It will negatively affect your credit rating.
- No debt is written off; you must repay the full amount.
When to Consider a DMP
A DMP might be a suitable option if you are experiencing temporary financial difficulty and can afford to repay your debts over time, but not at the original contractual rate. It is generally for people who:
- Have a regular income and can afford to make monthly payments.
- Have non-priority debts like credit cards, loans, and overdrafts.
- Do not qualify for formal solutions like a DRO or IVA, or do not want one.
- Expect their financial situation to improve in the future.
It's crucial to get impartial advice to decide if a DMP is right for you. You can use our DMP calculator to get an estimate or contact MoneyHelper for free guidance.
Impact on Your Life
Credit Rating
Making reduced payments will be noted on your credit file, lowering your score. This will remain for 6 years after the accounts are settled.
Your Home & Assets
A DMP does not directly protect your assets. However, as it's an informal plan, you are not required to sell your home or car to pay your debts.
Creditor Action
Because a DMP is informal, creditors can still pursue legal action, although this is less likely if you maintain your payments through a reputable provider.
Frequently Asked Questions About DMPs
What is a Debt Management Plan (DMP)?
A Debt Management Plan (DMP) is an informal agreement between you and your creditors to repay your non-priority debts. You make one affordable monthly payment to a DMP provider, who then distributes this money to your creditors on your behalf. It is not legally binding, making it more flexible than solutions like an IVA.
Is a DMP legally binding?
No, a DMP is an informal arrangement. This means creditors are not legally obliged to accept it, and they can still add interest or charges, or even take legal action. However, most creditors will agree to a DMP if it's arranged by a reputable provider. This informality also means you can change or cancel the plan if your circumstances change.
Will a DMP affect my credit score?
Yes. Because you are paying less than your original contractual payments, your creditors will record this on your credit file. This will lower your credit score and make it harder to get credit while you are on the plan. However, the DMP itself is not recorded on a public register like an IVA or bankruptcy.
How long does a DMP last?
The length of a DMP depends on the total amount of your debt and how much you can afford to pay each month. It can last for several years. Unlike an IVA, there is no fixed term and no debt is written off; you continue making payments until the debts are cleared in full.
See What Your DMP Payment Could Be
Use our free and confidential calculator to get an instant estimate of your monthly DMP payment based on your income and expenses.
Go to DMP Calculator