If you’re struggling to keep up with debt payments on things like credit cards, loans and store cards, a debt management plan (DMP) may be right for you.
This page explains what a DMP is, how it works and what you need to think about before getting one.
They’re called priority debts because the consequences of not paying them can be more serious than for other debts. You can’t include these debts in a DMP so you need to make sure you’ve got a way to deal with your priority debts before you set up a DMP.
Non-priority debts are less urgent and include things like bank loans, credit cards, student loans, water charges and benefits overpayments.
A DMP is an informal agreement between you and your creditors for paying back your non-priority debts. Non-priority debts are things like credit cards, loans and store cards.
You pay back the debt by one set monthly payment, which is divided between your creditors.
Most DMPs are managed by a DMP provider who deals with your creditors for you. This means you don’t need to deal with your creditors yourself.
A DMP is not legally binding, meaning you’re not tied in for a minimum period and can cancel it at any time.
A DMP may be a good option if the following apply to you:
However, you need to be sure you understand the impact a DMP will have:
If you’re unsure about whether this sounds like it’s right for you, you might want to think about other options for dealing with your debts.
If you have a debt in joint names with someone else, this can be included in your DMP. However, your creditors may still chase the other person for all of the debt. This is because whenever you take out a credit agreement, such as a loan or bank account, with another person, you’re both liable for the full amount of the debt. This is known as joint and several liability.
If both you and your partner are struggling with debts, you might want to consider setting up a joint DMP where you’d both be equally responsible for the repayment plan. It doesn’t matter if you have different levels of income or debts. You can also include debts that are only in one name in a joint DMP.
If you’ve decided a DMP is right for you, you’ll need to follow these steps to set one up: