Before making your final decision to start a Debt Management Plan (DMP) it is important that you remember some key advice about how a DMP is likely to affect you:

Other Debt Solutions might be suitable for you

A DMP is not the only debt solution which might be suitable to resolve your debt problem. Before making your final decision to apply for a DMP you should also consider the other available debt solution options.

DMP payments continue until your debts are paid in full

You will need to make monthly payments towards your debts until they are paid in full (unless you settle any or all of them early with a cash lump sum). You can estimate the time your DMP will last by dividing the total debt included in the Plan by your agreed monthly payment. By way of example, if the total debt included in your Plan is £12000 and you pay £100 a month your plan will last for:

£12000 divided by £100 = 120 months or 10 years

Free DMP Services are available

You can use a free service such as the one provided by the Step Change Charity to help you set up a DMP and all of the monthly payment you make will go towards paying your debt. If you are using a fee charging debt management company the length of your plan will be extended as some of your monthly payment will be taken in fees.

Interest and Charges may extend the length of your DMP

Even if your creditors agree to your proposed DMP payments they are under no obligation to freeze the interest and charges they are adding to your accounts. If interest and charges are added this will increase the amount of your debt and extend the time your DMP will last.

Only unsecured debts are included in a DMP

Only unsecured debts which are highlighted in your DMP will be included. Any unsecured debts which you leave out either by choice or mistake will remain outstanding and you will need to continue to pay these. Secured debts such as your Mortgage are not included. You must maintain the monthly payments towards your secured debts even after you start a DMP or you will risk the property or other asset that the debt is secured against being repossessed.

Your accounts will fall into arrears and your credit rating will be affected

A DMP will have a significant negative impact on your credit rating. Even if your creditors agree to your Plan payments the fact that you have reduced the amount that you pay will mean that your account will fall into arrears or further into arrears. Your creditors are therefore likely to record missed or late payments on your credit file and issue default notices against you which will be recorded on your credit file for 6 years. As a result during your Plan and possibly for some time afterwards your ability to get new credit, a new mortgage or other financial services will be seriously affected.

Your living expenditure will be restricted

During your DMP you will be required to live within a restricted living expenses budget. You should pay all of your surplus income into the Plan.

You must not ignore correspondence from your creditors during your DMP

It is likely that your creditors will continue to write to you during your DMP. You must not ignore any requests or demands that you receive from your creditors. If you are using a debt management company or charity you must inform them of any such correspondence and take their advice on what to do.

A DMP does not protect against further legal protection

Because a DMP is not a legally binding agreement your creditors are still allowed to take legal action against you to enforce the payment of their debt. This means that even if your Plan payments are agreed and you are maintaining them your creditors are still at liberty to apply for a CCJ (County Court Judgement) against you and then a charging order against your property if you are a home owner.

What if you do not maintain your DMP payments?

If you start an DMP but do not keep up your agreed payments it is likely that your creditors will start debt collection and enforcement activities against you. This action may include applying to the Court for a County Court Judgement (CCJ) against you and then a Charging Order against your property if you are a home owner.