Starting a Debt Management Plan (DMP) does not mean that you have to hand over the control of your money to someone else. You remain in full control of your finances at all times.

To help you manage both your income and monthly outgoings you are allowed to have a bank account. In fact it will be very difficult to start the Plan without one. Any income you receive will still be paid to you directly and you remain responsible for maintaining all of the payments in your living expenses budget including your rent or mortgage, council tax and utility bills.

You must also make your agreed payment either to your debt management company or directly to your creditors if you are managing the Plan yourself. As such if you do not currently have a bank account or you owe money to your current bank you should open a new one before you start your plan.

Can I keep my current bank account if I start a DMP?

You may well already have a bank account and be wondering whether you will be allowed to keep using it. This will very much depend on whether you owe any money to the bank you are currently banking with.

If you do not owe your bank any money then you can carry on using your account. However if you do owe your bank money (particularly in the form of a personal loan or a credit card) it is almost certain that you will need to change your account so that you remain in full control of the money that is paid into it.

If you do not change your account then based on the banking off-set rules your bank can actually help themselves to any money in your account to off-set the amount you owe them which is not being paid.

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How can I open a new account if starting a DMP?

Opening a new bank account is not difficult. However it is very important to take account of whether or not your credit rating is still good or if it has already been affected because you have missed payments to your creditors.

If your credit rating is good you will be able to open a bank account with any high street bank as long as you do not owe money to them. Just remember to avoid a bank in the same group as any that you owe money to. For example Lloyds banking group includes Halifax and Bank of Scotland.

If your credit rating is poor you can still open a new account. However you will need to make sure you mention this to the bank you approach and ask for their simple bank account commonly known as a card cash account.

This type of account will allow you to set up direct debits and standing orders no problem and will come with internet banking. However you will not be offered any credit facilities. You may or may not be offered a debit card as standard.

Should I consider a managed account if starting a DMP?

Some companies offer what are known as managed bank accounts. These accounts help you budget by splitting your income into two parts. One part is left to pay priority living expenses such as your rent, mortgage, utilities and of course your Debt Management Plan payments. The other is for you to use for your other variable expenses such as the housekeeping.

The advantage of a managed account is that you know that you will always have money available to pay your priority living expenses when they come due.

However, the major disadvantage of this type of bank account is that there is normally a monthly charge to keep the account open. This could be £10-£15 a month.

As such unless you are really worried that you will be unable to stick to your living expenses budget which you have set as part of your DMP then the cost of a managed bank account normally outweighs the benefits it provides.