Answers · UK 2025/26
What is a Debt Management Plan (DMP) and how does it work?
A Debt Management Plan is an informal arrangement where you make a single monthly payment to a DMP provider, who distributes it to your creditors. There is no fixed term — it continues until all debts are repaid. Unlike an IVA, debt is not written off, but interest is often frozen.
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**What is a DMP?** A Debt Management Plan (DMP) is an informal, non-legally-binding agreement between you and your unsecured creditors, administered by a debt management company or charity such as StepChange or National Debtline. You make one affordable monthly payment to the DMP provider, who distributes it proportionally among your creditors. **How it differs from an IVA** Unlike an IVA, a DMP: - Is not legally binding on creditors (they can opt out) - Does not write off any debt — you repay 100% of what you owe - Has no fixed end date; it continues until all debts are cleared - Does not appear on the Insolvency Register - Can be set up for free via charities (avoid paid commercial providers) **Example: Emma, 29, with £12,000 debt** Emma owes £12,000 across three credit cards at rates of 19–24% APR. StepChange negotiates with her creditors to freeze interest. She pays £200/month into the DMP. Without interest, she clears the debt in 60 months. If creditors had not frozen interest, it could take significantly longer. **Interest freezing** Creditiors are not legally obliged to freeze interest on a DMP. In practice, many do — especially when the DMP is run by a recognised charity — because receiving some payment is preferable to the customer entering insolvency. However, if a creditor refuses to freeze interest, the repayment period extends considerably. **Impact on credit** A DMP will normally result in default markers being added to your credit file for each account included, which stay for six years. There is no entry on the Insolvency Register. **Is a DMP free?** Charitable providers (StepChange, Citizens Advice, National Debtline) offer DMPs at no cost. Commercial providers may charge a setup fee and monthly management fee — avoid these when free alternatives exist. **When is a DMP appropriate?** A DMP suits people with manageable debt levels who can realistically repay in full within a reasonable period (say 5–10 years), and where debt write-off is not necessary. For larger debts or where full repayment is unrealistic, an IVA or bankruptcy may be more appropriate.
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This answer is informational only and does not constitute financial, tax or legal advice. Figures are for the 2025/26 UK tax year. See our methodology and sources.