What is a DMP?
- DMP stands for "Debt Management Plan".
- A DMP is a debt solution for anyone who has unsecured debts that they can't afford to repay. It is an informal arrangement and therefore not legally bound.
- May be suitable for people who do not qualify for an IVA
Will I be taking out a new loan to clear my other debts?
No. A Debt Management Arrangement is a way of helping you make affordable payments to your existing creditors.
How does a DMP pay off my debts without me borrowing any money?
An assessment of your income and outgoings which will demonstrate to your creditors that you cannot meet all of your payments. Yourself or a third party will then negotiate and agree a single new affordable monthly payment. From this payment an amount will be distributed to each creditor on a "pro-rata" basis.
Will a DMP be dealing with every company I owe money to?
No. Some of your debts may be regarded as "priority" debts due to serious consequences if payments are not made. An example is your mortgage or utility bills. These will be taken into consideration when calculating what amount is available to distribute to your other lenders and it is very important that you continue to pay these in full yourself.
Will my creditors/lenders definitely accept a proposed DMP?
Creditors and lenders do not have to accept DMP's, but could be willing to accept them if it is proven to be beneficial and agreeable to both parties. Please note that there is no guarantee that existing or threatened proceedings will be suspended or withdrawn. Your creditors may also continue to issue default notices and add additional costs to your debt.
Will interest and charges be stopped?
A DMP can never guarantee to freeze interest and charges, but through negotiation this can be often be achieved for a period of time.
Will I have to pay for longer due to the reduced payments involved?
This is possible; however, the payments should be affordable every month. Should your circumstances improve, your plan can be amended to speed things up. Please note that if your creditors refuse to freeze interest, paying the same debt over a longer period of time will increase the total amount to be paid.
What happens if I fail to make a payment?
Creditors are likely to withdraw their support of the plan and may commence court proceedings.
Will a DMP affect my credit rating?
Your credit rating may already be affected if you have been having difficulties making payments to your creditors. Also, any of your creditors may issue a default notice due to the fact you have not maintained the original agreement with them. It is likely that your ability to obtain further credit in the short term will be affected and this may also be the case over the medium to long term. Please note that credit reference agencies will retain details for 6 years after full payment of the debt has been made.
Will I be able to take out extra credit when I am in the arrangement?
It is not advisable for you to take out more credit when you are in a DMP. If you are already finding it difficult to pay the creditors that are in the arrangement, you shouldn’t want to take out any more credit.