Glossary · UK
What is Debt Management Plan (DMP)?
An informal arrangement with creditors to repay unsecured debts at a reduced, affordable monthly rate, usually administered by a third-party debt advice organisation.
Full Definition
A Debt Management Plan (DMP) is an informal, voluntary agreement between a debtor and their unsecured creditors to repay outstanding debts at a level the debtor can genuinely afford. DMPs are typically arranged through a free debt advice service such as StepChange, National Debtline or Citizens Advice, or through a licensed commercial debt management company. The adviser calculates an affordable monthly payment by comparing income against essential expenditure (rent, food, utilities), then distributes this payment pro-rata across all creditors. Most creditors -- including major banks, credit card providers and catalogue companies -- will accept a DMP, though they are not legally obliged to do so. During a DMP, creditors are usually asked to freeze or reduce interest and charges, which can meaningfully cut the total amount repaid. A DMP does not provide legal protection against creditor action (unlike an IVA or bankruptcy), so a creditor could still pursue a County Court Judgment (CCJ) if they choose not to participate. A DMP is recorded on your credit file and will negatively affect your credit score for the duration and for up to six years from the settlement of each debt. DMPs are best suited to those with a regular income who owe a manageable level of debt -- typically under £15,000 -- to a small number of creditors. There is no legal discharge of debt at the end; the debtor repays in full, but over a longer, more manageable period.