A Debt Management Plan is an arrangement made directly with your creditors that does not involve any legal proceedings. This arrangement allows you to pay reduced monthly payments towards your debt over a period of time agreed by yourself and the creditor.

You will normally enlist the help of a debt advisor or debt management company to help you work out the amount of disposable income you have to pay towards your debts and negotiate with your creditors.

This arrangement is normally reviewed every few months, or as soon as your circumstances change to ensure that your creditor is getting what they can and to get you out of debt quicker. It is important to note that failure to keep an arrangement with your creditor could result in legal action being taken against you to recover the debt owed. For amounts over £750 the creditor can petition the courts for your bankruptcy.

Repayment terms are normally set out between yourself and the creditors with the help of your advisor, however, the creditor is within their rights to change the terms at any time. Usually the terms would include:

A fixed monthly payment to your creditor

An agreed period of monthly repayments

Your interest and charges frozen to help you reduce your debts

If you are arranging a DMP through a Debt Management Company then you may be able to make the monthly payment directly to them. This is particularly useful if you are paying more than one creditor as they will divide each amount appropriately to the correct creditor. It also can help to have someone to help manage your monthly budget and continue to show your creditors your financial situation.

If you think a debt management plan may be suitable for you or you wish to know about your other options you should contact a qualified and experienced debt advisor.