manage your debt with a debt management plan

Your debt management plan (DMP) finishes when:

• You’ve fully paid off your debts.
• You’re able to go back to making full payments again.

Usually, a DMP might affect your credit rating, especially if you miss payments or pay less than the agreed minimum amount.

But here’s the good part, even if you’re paying less than what was initially agreed, sticking to your DMP payments shows future lenders that you’re taking responsible steps to repay your debts. This is better than not making any payments at all. Once your DMP ends, you can start working on improving your credit score.

There’s no specific amount of debt required for a debt management plan (DMP), but creditors consider certain factors before agreeing to one. They’re more likely to approve a DMP if:

• You’re having difficulty making your agreed repayments after covering your essential living expenses.
• You’re able to allocate some money toward repaying your debts each month.
• The monthly payment you can afford will enable you to clear your debts within a reasonable timeframe.
• You don’t have sufficient disposable income to settle your debts entirely within six months.

A debt management plan (DMP) isn’t listed separately on your credit file. Instead, each debt included in your DMP is designated as either ‘AP’ (arrangement to pay) or ‘defaulted’. A debt marked as ‘AP’ stays on your credit file for six years from the date it was settled, while a defaulted debt remains for six years from the first recorded default. Consequently, some or all of the debts marked as defaulted may have already vanished by the time your DMP concludes.

For the debts that remain on your credit file after completing your DMP:

• They should all show a balance of zero, indicating you owe nothing.
• They’ll be marked as settled (if they didn’t default) or satisfied (if they defaulted).
• Even with these debts on your credit report, managing your finances responsibly over time can help improve your credit score. Having zero balances and settled debts also enhances your chances of obtaining new credit at lower interest rates.

Creditors are likely to agree to a debt management plan if they see it as the best way to get their money back. We’ll tell them how much you can afford to pay each month, along with details of your income and essential expenses. This shows them that you don’t have any extra money to pay them more than what’s being offered. Each creditor will decide separately whether to accept the reduced monthly payment. But in most cases, they do. 

If you’re having trouble keeping up with your debt management plan (DMP) payments, please get in touch with us as soon as possible. It’s important to not stop making payments suddenly. If you do, your creditors won’t receive the expected money, and they might decide that the DMP isn’t effective. They could then start demanding full payments again. 

We understand that people’s situations can change. You might find that you have less money left over at the end of the month to allocate towards your debts. This could be due to losing your job or the increasing cost of living. Whatever the reason, we’re here to help. We can explore negotiating with your creditors to reduce your DMP payments. 

To get started with setting up your debt management plan (DMP), we’ll need details about your financial situation. Initially, we’ll ask about your income, essential expenses, and debts. It’s essential to provide proof of these amounts, so it’s helpful to gather relevant documents beforehand. These documents may include:

• Wage slips
• Benefit award letters
• Utility bills
• Council tax letter
• Bank statements
• Recent statements from your creditors

Once we have all the necessary information, it typically takes a few weeks to establish a DMP.

If you’re currently renting a property, having a debt management plan (DMP) won’t be a problem if you’re paying your rent and any rent arrears as agreed with your landlord. 

But if you’re in a DMP and looking to rent a new place, landlords and letting agents usually check certain financial information that’s publicly available, like bankruptcy details or court judgments. 

It’s worth noting that information about DMPs isn’t publicly available. Landlords and letting agents can’t see your credit report, which has more detailed information about your debts, without your permission.