ADVANTAGES OF A DMP

Reduce payments to an affordable amount – A debt problem will reduce the amount you have to pay to each creditor to fit the budget you can afford. This means that you will no longer have to borrow from one creditor to pay another and you get back in control of your financial situation.

No need to involve property – If you are a home owner, there is no requirement for you to release equity from your property as part of a debt management plan. However, you may wish to do so to make a lump sum settlement offer to your creditors.

Flexible solution – If you start a debt management plan, you can change it at any time. If your circumstances improve you can start to pay more or settle your debt in full. If your circumstances become worse, you can reduce your payments although your creditor may start charging interest again.

Exclude key creditor – You do not have to include all of your creditors in a DMP. Generally it is recommended that all creditors are included. However, it is possible to leave a creditor out and continue to repay them as normal.
 
Private agreement – A debt management agreement is not a formal insolvency procedure. As such, it is not advertised publically and your name is not included on the formal insolvency register.

DISADVANTAGES OF A DMP

100% of debt must be paid – Creditors do not agree to write debt off if you carry out a debt management plan. Although your monthly payments reduce, you still have to repay everything. This could take a very long time.  

Credit rating effected – Using a DMP will mean that you default on your payment agreements with your creditors. They will issue default notices against you which will be registered on your credit file. This will make it difficult for you to borrow more money in the future. Your credit rating will normally not start to repair until all your debt is repaid.

No legal protection – A debt management plan is not a legally binding agreement. As such, your creditors are still allowed to take legal action against you in the form of a County Court Judgement (CCJ) and or a charging order if you are a home owner.

Interest and charges continue – Your creditors are not obliged to stop adding interest and late payment charges to your balances. This means that some of your balances may continue to increase unless you can pay enough into your DMP to prevent this.