A Debt Management Plan, or DMP, is an informal way to repay your debts at a lower, more affordable monthly rate. It is not a form of insolvency, nothing is written off, and you can set one up for free.
A DMP is an arrangement, usually handled by a debt adviser or a debt management company, where your unsecured debts are combined into one reduced monthly payment that is shared out among your creditors. You pay what you can realistically afford, and the plan runs until the debts are cleared.
Because it is informal, it is flexible: you can change it or stop it, and your creditors are not legally bound by it. Many will freeze or reduce interest and charges as a gesture of goodwill, but they do not have to, and that is the main difference from a formal solution such as an IVA.
A DMP tends to suit people who can cover their priority bills and still pay something toward their other debts each month, particularly if their situation may improve over time. Because nothing is written off and creditors can still add interest, it works best where the debts are manageable given a bit more time, rather than overwhelming.
A DMP only covers non-priority debts such as credit cards, loans, overdrafts and catalogues. Priority debts like your mortgage, rent, council tax and energy must still be paid as normal, a DMP does not cover those.
You never have to pay for a DMP. Free providers such as StepChange and PayPlan set them up at no cost and are regulated by the Financial Conduct Authority. Commercial firms may charge fees that come out of your payments, which means it takes longer to clear your debt, so it is always worth using a free service first.
Compared with an IVA, a DMP is more flexible and leaves no insolvency marker on a public register, but it is not binding and offers no write-off. If your debts are too large to repay in a reasonable time, a formal solution may be more suitable. For a fuller picture, see our IVA vs DMP comparison.
Note: a DMP still affects your credit file. Reduced or missed payments and any defaults are recorded and can make borrowing harder during the plan and for a time afterwards.
An advisor can compare a Debt Management Plan with an IVA and the other routes for your situation, with no obligation.
You never have to pay anyone to understand your options. These services are free, independent and will go through every route with you.