A Debt Management Plan is an informal debt restructuring solution for unsecured debt.
Debt Management Plans are provided by debt management companies or charitable organisations who negotiate with your creditors to agree an informal restructuring solution. They will negotiate to freeze any further interest on your current debt and get them to accept lower monthly payments. If you owe money to more than one creditor then a DMP could be the right solution for you.
Disadvantages of a Debt Management Plan
- The arrangements of a DMP are informal, meaning your creditors do not have to accept a DMP and can change their mind at any time if they do
- By negotiating with your creditors to reduce your monthly payments, it usually means it will take much longer to repay your debts
- Your creditors are under no obligation to freeze interest charges on your debt
- Your credit rating could be severely affected by entering into a DMP. Any entries to your credit file will remain there for six years from the date they are entered
- You will not have an exact finish date this can only be estimated due to the creditors possibly charging interest & fee’s.
- It is very difficult to include bailiff or court debts into an DMP
Advantages of a Debt Management Plan
- You pay one monthly contribution to your creditors
- DMP’s are an informal arrangement which avoids any formal insolvency procedures such as bankruptcy or an IVA.
- Your monthly debt repayment could be reduced
Call and speak to one of our friendly advisors today on 0333 733 1565 for further debt advice & establish which debt solution is best for you