Debt Management Plan (DMP)
A Debt Management Plan (DMP) is an informal arrangement between you and your creditors to repay your unsecured debts at a reduced, affordable rate. Unlike an IVA, it is not legally binding — but it offers flexibility and can be set up quickly.
How a DMP Works
A DMP consolidates all your unsecured debt payments into a single monthly payment based on what you can afford after essential living expenses. The payment is distributed to your creditors proportionally.
Key Features
| Feature | Details |
|---|---|
| Debt types | Credit cards, loans, overdrafts, catalogue debts |
| Duration | Until debts are fully repaid |
| Monthly payment | Based on disposable income after essentials |
| Legal status | Informal — not court-approved |
| Interest | Often frozen on request (not guaranteed) |
| Flexibility | Can be adjusted or cancelled at any time |
DMP vs IVA — Which Is Better?
| DMP | IVA | |
|---|---|---|
| Debt write-off | ❌ No — repay in full | ✅ Up to 80% written off |
| Legal protection | ❌ Informal only | ✅ Legally binding |
| Duration | Until fully repaid (could be 10+ years) | Fixed 5-6 years |
| Flexibility | ✅ Can change/cancel anytime | ❌ Must maintain payments |
| Home at risk | No | No |
| Credit impact | Less severe (while active) | 6 years on credit file |
In most cases, if you qualify for an IVA, it is the better option because a significant portion of your debt can be written off. However, a DMP may be more suitable if:
- Your debts are relatively small (under £6,000)
- You want flexibility to adjust payments
- You don’t want a formal insolvency on your record
- You expect your income to increase soon
Do I Qualify for a DMP?
You may benefit from a DMP if:
- You have two or more unsecured debts you’re struggling to repay
- You have some disposable income after essential expenses
- Your total debt is under £6,000 (above this, an IVA may be better)
- You can commit to regular monthly payments
Advantages of a DMP
- Single payment — One monthly payment replaces multiple creditor payments
- Affordable — Based on what you can actually pay after essentials
- Flexible — Can increase, decrease, or cancel at any time
- No legal process — No court involvement or public insolvency register
- Interest may be frozen — Many creditors agree to freeze interest on a DMP
Disadvantages of a DMP
- No debt write-off — You repay 100% of what you owe
- Not legally binding — Creditors can still take action (rarely do if payments are made)
- Can take years — May take 10+ years to clear large debts
- Credit impact — Missed/late payments remain on your credit file
- Interest not guaranteed frozen — Creditors can refuse
Not sure whether a DMP or IVA is right for you? Check your qualification → — our assessment will recommend the best option for your situation.
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