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This is an informal arrangement between you and your creditors which allows you to repay your debts, at a rate that you can afford without relying on further borrowing.

What is a Debt Management Plan (DMP)?

A DMP is an informal arrangement between you and your creditors that allows you to repay your debts, normally in full, at a rate that you can afford without relying on further borrowing. If during your DMP you are able to offer creditors a lump sum to settle your debts, it is possible to agree to discounted settlements.

Is a DMP suitable for me?

A DMP is suitable if you are struggling to meet their minimum debt payments but have some surplus money available each month once you have paid all your household bills. Household bills includes “priority payments” which includes rent, mortgage and utilities plus something toward any arrears. Our advisors will assess your situation and determine if a debt management plan is suitable for you.

There are other solutions including IVA’s, Debt Relief Orders, Bankruptcy and Dealing Directly with your Creditors which may be appropriate. If you live in Scotland, the solutions are different, please visit Scottish Debt Solutions.

For full debt advice and whether a DMP would be your best option, you can also speak to one of our advisors.

DMP – The benefits and the risks

Doing the right thing is only possible if a clear picture is available of the advantages and disadvantages of a DMP. The plan needs to very quickly get your debts under control and start to relieve debt but there needs to be a longer-term plan to clear your debt.

What does the service cost?

Management fees: Our fees are fair and cover:

  • Review of your engagement pack and supporting documentation to ensure a DMP plan is still appropriate
  • Drafting your plan, sending this to creditors, chasing up responses and ultimately gaining creditors approval of your offer
  • Dealing with creditors’ queries
  • Monitoring your payments and distributing these to creditors within 5 working days of your funds clearing our DMP account

The fee we charge to cover our services is calculated at £48.95 or 49% of your monthly contribution, whichever is the lower.

As the setup and initial period of your Debt Management Plan are the busiest, we charge an enhanced Fee of £400. This is a one-off fee, and it includes:

  • Formulating your Income and Expenditure (I&E) budget and calculating the affordable offer of repayment to your debts included in the plan.
  • Reviewing your draft Payment Plan.
  • Speaking to your creditors and negotiating monthly debt payments.
  • Liaising with and providing information to your creditors on your behalf.

Our Enhanced Management Fee will be deducted from your agreed monthly payment (in addition to our Monthly Management Fee) until it is repaid. If you haven’t repaid your one-off fee by month 18, the remaining amount is written off.

Creditors will receive a reduced payment during this time of not less than 52% of your monthly payment. You may go into arrears or further arrears during this period but these arrears will be included in your plan.

Important Information

All debt solutions should be very carefully considered. Fees will be charged if a solution is taken in order for us to set up your plan and maintain it – all fees will be outlined during your consultation. For further information on fees, please see the FAQ section of the different solutions available. Retained payment may place you further into arrears. You have the right to a cooling off period of 14 days. 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. Calls to our free phone number from mobile phones and other networks may be charged.

The Insolvency Service website has helpful information on https://www.gov.uk/options-for-paying-off-your-debts/overview to support those who find themselves in financial difficulty during the recession.

The Debt Advisor Ltd is regulated by The Financial Conduct Authority. This means we are able to offer debt advice and deliver both formal and informal solutions. DMP’s do need to be carefully considered and you must take independent debt advice. We hope that the information and debt advice on this site including Frequently Asked Questions, will help inform you.

Benefits
  • A Debt Management Plan is designed to allow you to pay what you can realistically afford to your creditors each month. Generally creditors will agree to accept reduced payments and freeze or reduce interest charges.
  • The major benefit that we find our clients appreciate is having us liaise and deal with all creditors and their correspondence. This includes dealing with phone calls, letters and takes away the stress of creditor interaction.
  • Creditors may freeze interest and charges
  • If you’re struggling to meet your normal payments to creditors, a DMP allows you to pay an affordable monthly contribution
  • A DMP is flexible. You can terminate your plan at any time.
  • A DMP is an informal solution and should ideally provide for you to clear your debt in less than 10 years. If the plan looks like it could take more than 10 years, a DMP may not be appropriate unless you feel your circumstances are likely to change which will enable you to clear your debt in a 10 year period.
  • Creditors may stop further action. Our team are attentive and will work hard to ensure creditors do accept your plan.
Disadvantages
  • A DMP is an informal debt solution and creditors are not obliged to freeze interest and charges. Some creditors may agree to reduce interest charges rather than freeze them. Continued charges could result in it taking longer and costing you more to repay your debts.
  • As a DMP is an informal arrangement, there are certain debts such as arrears of council tax which cannot be included due to the risk of action against your assets. There are other solutions such as an IVA which can include arrears of priority bills.
  • A DMP could have a negative impact on your credit file. Creditors can issue default notices which will remain on your credit file for 6 years. Your ability to obtain credit will be affected.
  • You may from time to time receive an unwanted call from a creditor especially if they are using a debt recovery company. Politely tell them you are in a DMP and state our company name and your personal advisor. We will take care of the rest.
  • We cannot guarantee that creditors will not take legal action or that they will stop collection activity. Such action could result in a judgment and could potentially lead to a charging order if you have a property.
  • If you cancel your DMP, creditors could end payment arrangements previously agreed and charges could be reapplied to your debts.

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The DMP Process

A debt management plan (DMP) can help you get your finances back in control. 

A Debt Management Plan (DMP) is an informal arrangement between you and your creditors which allows you to repay your debts, normally in full, at a rate that you can afford without relying on further borrowing. We realise that dealing with debt is a particularly difficult, stressful and confusing time. It makes sense to talk to family or a trusted friend but we know this is not always possible.

If you have struggled to pay your minimum payments or perhaps have ended up in arrears with debt payments due to loss of income or a change of circumstances, a DMP can help you set up affordable monthly payments with your creditors. Your DMP must aim to get your debt cleared in a reasonable period of time which is normally less than 10 years.

The budgeting process and initial consultation

When we speak to you, we will carry out a detailed review of your income and expenditure including your debts to assess whether a DMP is the most appropriate solution. The initial review will identify a monthly contribution that you appear to be able to afford. We will go through a consultation with you which will cover:-

  • How a DMP works.
  • How long it will take to clear your debts.
  • The costs we will charge for administering your plan.
  • The benefits and risks of a DMP.

If DMP is the most appropriate solution for you we will send you a Consent Pack. This will include a Key Fact Summary detailing why a DMP may be an appropriate solution for you. The pack also includes information you have given us, information you still need to supply,  documentation for you to sign and return, including the authority forms allowing us to speak to your creditors. When we receive your signed and completed Consent Pack, we will ensure we have enough information to set up your plan efficiently. The vital information we need includes:-

  • Signed agreement terms, authority to act and consultation notes.
  • Photo ID, proof of residence.
  • Proof of income.
  • Account numbers for all debts.

We will also need information on your assets and we recommend you send us your latest credit report. This is available free of charge from www.noddle.co.uk

Setting up your plan

Your DMP will go “live” when we have the vital information and have set up your first payment to be received within 21 days. We are obliged to ensure your 1st payment goes to creditors within 30 days of your plan going “live”. You will be allocated a debt management advisor who will ensure you understand the process.  From this point, you can then start referring any creditor calls or correspondence directly to us. We will request updated balances from creditors and ask them to refrain from action. The updated balances are included in a Financial Statement which will be issued to your creditors, along with a proposal for a ‘pro-rata’ payment, in line with what you can reasonably afford. We shall liaise with your creditors to negotiate your reduced payment, and request that further interest and charges are frozen where possible. We aim to respond to all creditor communications within 5 days of receipt. We scan copies of all communications with you and your creditors onto our system. We will keep your payments in a separate non-interest bearing debt management client account. We will make pro-rata payments to your creditors within 5 days of receiving your funds into the account. You may occasionally still receive creditor statements, but these will be for your information purposes only. At anytime, you can contact us if you find that your circumstances have changed and we will conduct a review and update your income and expenditure and information on your circumstances. Alternatively, a review will be completed every six months, to ensure that we are still providing you with the very best advice.

What happens if I cannot make a payment?

Delayed or missed payments can break arrangements with creditors we have set up for you.  This in turn could lead to your debts increasing and creditors taking action. If you fall into difficulty, it’s vital you get in touch so we can assess your situation. We are obliged to let creditors know of missed payments within 30 days of non payment. If you believe you will need several months to resolve your difficulties, we do have a “hardship” process which involves asking creditors to freeze action and charges for 3 months. They don’t have to do this but the more information we can provide of the circumstances for your hardship, the more likely it is that creditors will treat your case sympathetically.

Is there anything else I should know?

You have the right to cancel your arrangement with us at any time, which should be made in writing.  If you cancel your arrangement within 14 days of agreeing to our Terms of Business, we will refund any payments we have received from you during this time, unless a distribution has already been made to your creditors. If you cancel at any time after the first 14 days, no further charges will apply after the date of cancellation; however any set up and management fees already charged will be retained by The Debt Advisor. We will refund any monies (including management fees) that have not been distributed to creditors at the time your notice of cancellation is received and we will inform the creditors of your decision. There are sources of free debt advice and services. You can find out more by contacting the Money Helper Service or 0800 011 3797.

Advice on other Solutions

All debt solutions should be very carefully considered; we will always provide you with the most appropriate advice. This will include advice on all potential solutions which will include DMP, IVA, Bankruptcy, Debt Relief Orders, Debt Consolidation through raising Finance and setting up your own payment plan. The Insolvency Service website has helpful information on https://www.gov.uk/options-for-paying-off-your-debts/overview to support those who find themselves in financial difficulty during the recession.

Frequently Asked Questions, FAQ’s 

We have produced FAQ’s on all debt solutions including DMP’s.

Before you enter into a Debt Management Plan, there are key areas that should have been covered with you.

  • You should have been advised on all the options for dealing with your debt.  These include bankruptcy, debt relief order, individual voluntary arrangement, debt management plans and full and final settlements. The advantages and disadvantages of each must be discussed with you so that you can make an informed choice.
  • All debt management companies offering debt counseling and adjusting must be regulated by The Financial Conduct Authority, FCA and must adhere strictly to their rules and guidelines. Check your provider is regulated by the FCA. If not do not deal with them.
  • You will know the estimated total cost to you of the arrangement and the time it will take for your debts to be paid. If your provider does not, you must ask to find out. Any money you pay to your provider to cover their fees will not be used to repay your debts. Think carefully if the fees you are paying are higher than the sums going to creditors.
  • You need to have done through a full and accurate budgeting process with your DMP provider. This is vital to make sure that the payments you are asked to make are affordable for yourself and fair to your creditors.
  • You will have been told what to do if you are not happy with the service you receive and how, and who you can complain to. You should refer such complaints to the provider (us) first to give them a chance to put things right.  They should tell you clearly how to do this. If you are still not happy with the outcome, you can complain to the Financial Ombudsman Service(http://www.financial-ombudsman.org.uk/) which is an independent service that will look into your complaint and can award you compensation if they decide in your favour. You can be repaid any fees charged and may be awarded compensation by these schemes.
  • There are sources of free debt advice and services. You can find out more by contacting the Money Helper Website or 0800 138 7777.