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Debt Management Plan (DMP)

A DMP allows you to pay off your debt in full, but through one lower monthly payment which is paid directly to your debt management company and then divided between your creditors.

Debt Management Plan (DMP)

What is a Debt Management Plan?

Debt Management Plans (DMPs) are designed for those people who are struggling to meet the minimum monthly payments on all of their outstanding debts. In order to qualify for a DMP you must have some money left over after all essential household bills and general living expenses have been paid in which to pay towards your debts, but not quite enough to make all the monthly payments in full. If your financial situation means that you are struggling to meet your basic living costs, such as utility bills and housing costs, then a DMP is not the right solution for your situation and you may want to consider an alternative such as bankruptcy.

How do DMPs work?

With a DMP, your various debts such as credit cards, personal loans and catalogue debts are brought together under one affordable monthly payment. This one payment will be at a lower level than what you are currently paying and will be distributed amongst all your creditors for you on a pro-rata basis, meaning those you owe more money to will receive a greater portion of the monthly payment you make.

EXAMPLE: Imagine you have three credit cards, two store cards and a payday loan. Under a DMP you would make one monthly payment direct to your debt management company. They will then divide this amount between the six individual debts on your behalf. You will not be required to make any further payments direct to your creditors.

Having just the one monthly payment could make it easier for you to manage your finances and give you added peace of mind knowing that all your debts are being serviced.  Your creditors need to agree to the DMP as it involves you making lower monthly payments to them and therefore increasing the time they will have to wait to get their money back.

Are DMPs legally binding?

A DMP is an agreement made between the individual who owes money and the company, or companies, to who the money is owed; there is no court involvement at all and it is therefore among the least serious debt solutions out there. Unlike an IVA, a DMP is not a legally binding agreement and therefore you can cancel it at any point. The flip side of this, however, is that your creditors are also able to cancel the agreement should they decide they want you to pay back your debts quicker. As this is not a legal agreement, you are not given the same protection from your creditors as you would be with an IVA, meaning your creditors may still contact you asking for more money even if they initially agreed to the DMP.

What are the positives and negatives?

The positives are that you do not have to deal directly with your creditors anymore and the interest on your outstanding balances is usually frozen, although this will need to be negotiated with each creditor individually. Some creditors may not agree to freeze the interest, and if this is the case, the balance on your account will continue to grow, and due to you making lower payments, you may end up paying more in the long-run under a DMP than you would if you were able to make the standard monthly repayments. Under a DMP, you will be allowed to keep any assets you own, including vehicles and property.

With a DMP none of your debt will be written off; you will have to pay back the full amount that you owe, plus any interest or charges which have been added to your balance. The length of time this takes will depend on the level of debt you have, plus the amount you are able to pay back each month. While this is one of the least serious debt solutions available, you will find that your credit rating will still be negatively affected due to the fact that you will be making significantly reduced payments to your creditors.

Lawrence O'Hara

Insolvency Adviser

Tel: 028 2132 6269

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    After losing my job, I started relying on credit cards and payday loans to get me through the month. As the debt build up, I found it increasingly difficult to keep up with the monthly payments and was hit with late penalties and added interest which only made the problem worse.

    I was ignoring letters and phone calls, and dreading knocks on the door fearing it was bailiffs. This was when I knew I had to seek expert advice. After contacting Northern Ireland Debt Solutions, I felt an immediate sense of relief. Within a matter of days, the phone calls and threatening letters stopped, and I was finally able to move on with my life.


    After burying my head in the sand for many years, I knew I had to face up to my debt problems. I was ashamed of the situation I had got myself in to, and it took a lot of courage to pick up the phone and make that first call to Northern Ireland Debt Solutions.

    My adviser was sympathetic to my problems and I never felt as though I was being judged. He explained all of the options which were available to me and explained how each would work in my situation. While bankruptcy is a big step, I knew it was the best thing for my circumstances. I paid off what I could afford and the rest was written off. Three years on, I am in a much better place financially and able to look forward to the future.

    Our Insolvency Practitioners
    are regulated by ICAS or IPA

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