Almost anyone can use a Debt Management Plan. As an informal debt solution there are very few qualification criteria. However it is not suitable for everyone.

• Can your debts be included?
• Can you afford a reasonable monthly payment?
• Do you need greater legal protection?

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Can your debts be included in a Debt Management Plan?

You can only include unsecured debts in a Debt Management Plan. These include things like bank loans and overdrafts, credit and store cards, catalogue debts, doorstep and payday loans.

You cannot include secured debts such as mortgage or vehicle finance. If you do not continue to make these payments, you risk the home or car being repossessed.

In addition although they are unsecured you cannot include tax debts. If you owe money to HMRC in the form of income tax or VAT this type of agreement will not be suitable for you.

Where you owe tax or other forms of debt to HMRC you may need to consider the option of an IVA or going bankrupt.

Can you afford a reasonable monthly payment?

There are no rules governing the amount you have to pay into a DMP each month. This is based on your disposable income which is calculated by deducting your reasonable living expenses from your monthly income.

However because you will still be responsible for paying your entire debt back unless you can pay a sensible amount each month this could take an extremely long time.

For this reason it is only sensible to use this solution if you can repay your debt within a five year period. If not you should consider other debt management options or view the DMP as a temporary measure to give you a breathing space until your financial situation improves.

Do you need greater legal protection?

A debt management plan does not offer you or your property legal protection from your creditors. This means that they are still able to take action against you to collect their debt if they wish.

Even though you are in the plan any of your creditors cold still apply for a CCJ against you or a Charging Order against your property if you are a home owner.

Your creditors also have no obligation to stop adding further interest or charges to your accounts. As such, although you are paying money towards your debts each month, the balances will not drop as quickly as you expect and in some cases may even increase.

Your creditors may decide to suspend their interest charges on the basis that you maintain your agreed payments. However there is no guarantee of this and some interest may still be added during the life of the Plan.