DMP (Debt Management Plan)
How much debt can I have?
There is no minimum amount or maximum amount to qualify for an IVA. However, it is normally not the best option to deal with your debts if you are unable to clear them within 10 years.
What type of debt will be included?
DMP’s are generally used for commercial credit debts, such as loans, credit cards, store cards, payday loans and overdrafts.
When will I be free from my debts?
There is no maximum or minimum time limit, however a DMP should only realistically considered an option if you will be debt free within ten years.
How does this option work?
A DMP is an informal agreement between you and your creditors. In a DMP you offer to your creditors what you can afford to repay towards your debt after you have paid all your essential outgoings every month. However, you continue to repay this amount until all your debts are cleared, or until your finances have improved to the point where you do not need a DMP any further.
You will need the assistance of a DMP company to set up a DMP, and you should be careful to ensure the company you chose does not charge fees for supervising your DMP.
A DMP is generally a good option when you have a low level of debt and have a monthly surplus to offer to your creditors that will see you debt free in a reasonable timescale.
What are the advantages?
- It allows you to clear your debt without entering a formal arrangement
- You only repay one affordable monthly repayment after taking into account your essential outgoings
- All payments made are spread out fairly amongst your creditors
- You can retain your house and other assets
- Your DMP company will handle dealing with your creditors which will help to reduce the stress and anxiety of dealing with your debts and creditors
- If you circumstances improve you can increase your repayments and repay your debt quicker
- If your circumstances deteriorate you may be able to reduce your DMP payments
- There are DMP providers available who do not charge any upfront fees or ongoing costs
- You can usually continue to trade when you enter a DMP
- You can remain as a Limited Company Director and enter into a DMP
What are the disadvantages?
- You will have to repay your debts in full. This could take a long time. We recommend that if this is to take longer than ten years then a DMP may not be the best option at dealing with your debts.
- It is an informal agreement; therefore the creditors do not have to accept the offer made, or freeze interest. So you cannot guarantee all creditors will agree to the DMP
- Creditors can continue to pursue you and enforce the debt by other means, for example petitioning for your bankruptcy
- A DMP will affect your ability to get credit for six years
- An IVA will affect your abilitiy to get credit for six years
- There are some type of debts that will not be written off