If you are trying to answer the question: What is a Debt Management Plan (DMP) you have come to the right place. A DMP allows you to reduce the payments that you make to your unsecured debts each month so that they fit into a budget which you can afford.
The Plan can be implemented very quickly so you start to reduce the stress caused by your debts almost immediately. It can be used by anyone and there is no restriction on the amount of debt that can be included or any minimum amount that you must be able to pay back each month.
A Debt Management Plan is an informal agreement
A DMP is not based on a formal legal framework. It is an informal agreement with your creditors allowing you reduce the payments you make to them each month.
Because of its informal nature the Plan is very flexible. You can implement your own plan if you wish or use a third party to set up and manage the agreement for you. It is also possible to change the amount you pay into your plan at any time and even stop the plan and use an alternative solution whenever you want.
BMD Tip: The Plan is also a very private arrangement. There is no formal register of DMPs and so the risk of anyone else discovering that you are in such an agreement is very low.
Do you want help to start a DMP? Give us a call on 0800 077 6180 or complete the form below to speak to one of our experts
Why will my creditors agree to a Debt Management Plan?
Before your creditors will agree to your Plan payments you will have to prove that you are struggling by providing information about your financial circumstances. This is normally in the form of a document which includes a list of your monthly income and reasonable living expenses and the amount you are offering to pay.
Given that the living expenses that you have listed are reasonable and they can see that you are making your best effort to repay as much as you can your creditors will understand that you are unable to pay more and should accept your payment offer.
Another important factor in the their decision making is that although your creditors may agree to the Plan they are not agreeing to write off any debt for you. They are simply agreeing to extend the length of time that they give you to pay back what you owe.
BMD Tip: Because the agreement is informal at any time your creditors have the option to ask for a review of your financial circumstances and to demand that you pay more into the plan if they feel you can afford to do so.
How much will I have to pay into my Debt Management Plan?
The key to a DMP is that it turns your debt payments on their head. So instead of paying what your creditors demand you only pay what you can afford. This figure is based on your Disposable Income which is the amount you have left over from your income after all of your reasonable living expenses have been deducted.
There is no minimum amount that you need to be able to pay before you can start your Plan. This means that you can use the arrangement even if you have debts totalling many thousands but can only afford to pay £100 a month or even less.
BMD Tip: If your circumstances change while you are in your Plan you can increase or decrease the payments you are making accordingly. As such if your income increases you can increase the payments you make and if it falls your payments can reduce.
What is a Debt Management Plan?
A Debt Management Plan (DMP) is one of the most common debt management solutions. How much do you have to pay towards your debts? What is the main advantage of a DMP? To find out more please visit: http://beatmydebt.com/debt-management-plan/what-is-debt-management-plan
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