Generally speaking anyone can negotiate with their creditors to carry out a debt management plan.

Debt management plans are not governed by the law. They are simply a gentleman’s agreement between you and your creditors to reduce the amount you pay towards your debt each month. As such you do not require any special circumstances or the help of a solicitor or accountant to start a DMP.

However before deciding whether a debt management plan is right for you, there are some rules of thumb which you should consider:

Can you repay your debt in a reasonable time?

Reducing the amount you pay to your creditors each month will automatically increase the length of time it will take you to pay back what you owe. As such, if your debts are high and what you can pay back is small, it will take you a very long time to become debt free.

Generally if using a debt management plan you can pay your debt back within 5 years, then it could be a sensible solution. If not there may be a better alternative such as an individual voluntary arrangement (IVA).

Are your circumstances due to change for the better?

If the amount you can afford to pay to your creditors is initially only small but you know that your income will increase in the short or medium term, then a debt management plan can give a very useful breathing space.

Because a DMP is flexible and te payments you make can be changed, once your income improves, you can easily increase your payments so that your debt is repaid in a reasonable time.

Do you want to keep your property seperate?

There is no requirement to sell a property or release equity from it as part of your debt management plan. As such, you can focus on repaying your debt based on your monthly income alone.

However, you should be aware that your creditors may try to secure their debt by issuing a county court judgement (CCJ) and then a charging order against your property.

Do you want to exclude some of your debt?

If you carry out a debt management plan it is always advisable to include all of your debts so that your creditors can see you are treating all of them in the same way.

However, it is possible to leave a creditor out of the plan and continue to pay them normally. The reason for this may be because you are self employed and need your bank overdraft or credit card to maintain your business.

If you choose to leave a creditor out of your plan, you will need to justify the reason for doing so if you include the cost of paying them in your monthly expenditure budget. 

How to Start

Got a question? Why not use the Debt Management Forum which gives you direct online access to debt management experts

Call us now on 0800 077 6180 to discuss how a Debt Management Plan can solve your debt problem