Debt Management Plans

Debt Management Plans (DMPs)

A Debt Management Plan is an informal arrangement between you and your creditors that allows you to pay off your debt through affordable monthly payments.

At NDH Financial, we're personal insolvency specialists, with our own in-house licensed Insolvency Practitioner. We provide information about all debt solutions, however, we specialise in one particular form of debt solution, known as an IVA.

If you have debts that add up to more than £10,000 or have to deal with numerous smaller creditors, an IVA may also be the option for you.

What Debts Can Be Included in a Debt Management Plan?

A DMP can only include unsecured, non-priority debts. These debts aren't secured against an asset and won't result in immediate serious consequences if not paid.

Debts You CAN Include

DMPs can include the following debts (but is not limited to):

Debts You CANNOT Include

The following debts are not suitable for DMPs (but is not limited to):

  • Mortgage or rent arrears
  • Council tax
  • Gas and electricity bills
  • Court fines & magistrate fines
  • Child maintenance arrears
  • Student loans
  • Secured loans (e.g. car finance)
  • TV licence arrears

Priority debts like mortgage, rent, and utilities need to be dealt with first, as they can lead to serious consequences such as eviction or loss of essential services.

Not Sure if a DMP is Right for You? You Could Consider an IVA.

An IVA is a formal agreement between you and your creditors, arranged and supervised by a licensed Insolvency Practitioner.

You might be eligible for an IVA if you:

  • Owe £7,000 or more in unsecured debt
  • Have regular income (employment, self-employment, pension)
  • Can afford monthly payments to your creditors
  • Have at least two creditors
  • Want legal protection & a clear path to becoming debt-free
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How Do Debt Management Plans Work?

Instead of making multiple payments to different creditors each month, you make one single payment to your DMP provider. Debt management companies then distribute this money among your creditors based on how much you owe each one.

Payments are based on what you can actually afford to pay after your essential living costs are covered - not what your creditors originally agreed to. This gives you breathing space to deal with your creditors without the constant pressure.

Who Qualifies for a Debt Management Plan?

DMPs are informal arrangements, so there's no strict legal criteria. However, you'll generally need to demonstrate:

  • Unsecured debts you're struggling to repay
  • Regular income (from employment, self-employment, pension, etc.)
  • Surplus income after essential expenses to make monthly payments
  • UK residency (England, Wales, or Northern Ireland - Scotland has different schemes)

There's typically no minimum debt level required for a DMP, though if you owe less than £7,000, other debt solutions might be worth considering.

Not sure about your debts?

Although IVAs are our bread and butter and this is what we specialise in, we understand this option won't be suitable for everyone.

Book a call with our UK debt consultants today to discuss your financial situation and we'll help you identify appropriate solutions for managing your debts.

Book A No Obligation Consultation

Will Creditors Accept Your DMP?

Because DMPs are informal, creditors aren't legally obligated to accept them. They may agree if:

  • You're genuinely struggling financially
  • You've made a reasonable payment offer based on affordability
  • You're demonstrating good faith in trying to pay off your debt

That said, each creditor decides individually, so there's no guarantee all will agree, and they can change their mind later. Some creditors may agree to freeze interest and charges, but this isn't guaranteed.

Can creditors refuse a DMP?

Creditors are under no legal obligation to accept them. Each creditor decides individually whether they agree to reduced payments. Even if they initially accept, they can change their mind later, reject future proposals, or even take legal action. This is a key limitation of DMPs compared to formal solutions like IVAs, where 75% approval binds all creditors.

Pros & Cons of DMPs

Pros Cons
One Simple Payment - Stop juggling multiple creditors No Legal Protection - Creditors can still contact you and take legal action
Affordable & Manageable - Based on what you can afford Interest Usually Continues - Debt keeps growing while you repay (creditors may freeze interest and charges, but it's not guaranteed)
Less Stress - Provider handles dealing with your debts Takes 5–10+ Years - No fixed end date, no debt write-off
Flexibility - Can adjust if circumstances change Every Creditor Must Agree - One refusal can undermine the plan
Free Options Available - Many charities offer no-cost DMPs Credit Score Impacted - Affects credit for 6 years (same as IVA)
Fees May Apply - Some providers charge setup and monthly fees

Is an IVA right for you?

Many people researching DMPs find an IVA is more suitable, especially if they owe £7,000 or more.

An Individual Voluntary Arrangement (IVA) is a legally binding agreement that offers:

  • Legal protection from creditors
  • Interest and charges frozen immediately
  • Fixed 5-6 year term with remaining debt written off
  • Only 75% of creditors need to agree (not all)
  • One affordable monthly payment based on your circumstances
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What’s the difference between an IVA and a debt management plan?

What is an IVA?

An individual voluntary arrangement (or IVA) is a legally binding agreement between you and your creditors to ensure you repay your debt within a certain period of time. You will need 75% or more of your creditors at the decision procedure to approve the proposals for the arrangement to be made.

Both DMPs and IVAs let you make affordable monthly payments, but the similarities end there:

DMP IVA
Legal Status Informal Formal & legally binding
Creditor protection They can still contact you No contact or legal action
Interest & charges Usually continue Frozen from approval
Duration 5-10+ years (until paid in full) Fixed 5-6 years
Debt write-off None - pay everything back Remaining debt written off*
Creditor approval Every creditor must agree 75% approval binds all
Legal action risk Creditors can still pursue You're legally protected
Minimum debt No minimum Typically £7,000+
Flexibility Can cancel anytime Requires formal variation/termination
Provider fees Varies (free with charities) Included in monthly payment
Credit impact 6 years 6 years

Both affect your credit score for 6 years - but only an IVA offers legal protection and debt write-off.

Already in a DMP? You Can Switch to an IVA

A lot of people start with a DMP, only to discover months or years later that:

  • Their debt isn't decreasing because interest continues
  • Creditors are still contacting them despite the arrangement
  • There's no clear end in sight
  • They're no closer to being debt-free

The good news is you can switch from a DMP to an IVA anytime.

Why People Make the Switch

  • Gain legal protection from creditors
  • Stop interest from continuing to build
  • Get a fixed end date (5-6 years)
  • Write off remaining debt after completion
  • Reduce the total repayment amount in many cases

Because DMPs are informal, you can exit without penalties and transition to an IVA if it's more suitable.

Apply Today

Get in touch with NDH Financial for a free consultation about your debts to see if an IVA could help you.

Call us on 0800 002 9051 or apply below.

Apply Now

An IVA may not be suitable in all circumstances.  Fees apply. Your credit rating may be affected

Getting a DMP: FAQs

Because DMPs are informal arrangements, they offer no legal protection against bailiffs or enforcement action. If a creditor has already obtained a County Court Judgment (CCJ) or is taking legal action, a DMP won't stop them from proceeding with bailiff action. For legal protection, you'd need a formal debt solution like an IVA.

A DMP can negatively impact your credit score and remain on your credit file for up to 6 years. Defaults may also be recorded on the accounts included in your DMP. This is the same duration as an IVA, but offers legal protection and debt write-off that a DMP doesn't.

Having a DMP on your credit file will make it more challenging to get a mortgage for up to 6 years. Lenders view DMPs as a sign of financial difficulty, which can result in applications being declined or only higher-interest products being available. Even after the DMP is removed from your credit file, you may need to declare it on mortgage applications.

DMPs can work if all creditors agree, you can maintain payments, and you're comfortable with a 5-10 year repayment period. However, they don't always work because: creditors can refuse or withdraw at any time, interest often continues to build, and there's no debt write-off. Many people find formal solutions like IVAs more effective because they offer legal protection and a fixed end date.

Not quite. Debt consolidation typically involves taking out a new loan to pay off multiple debts, leaving you with one loan to repay. A DMP doesn't involve taking out new credit; instead, your existing debts remain separate. However, you make one payment to a provider who distributes it among creditors. Both result in one monthly payment, but the mechanisms are different.

Because DMPs are informal, missing a payment can have serious consequences. Creditors may withdraw their agreement to the DMP, start contacting you directly again, add interest and charges back on, or take legal action. Your DMP provider may also charge missed payment fees. This is another key difference from formal solutions like IVAs, which have built-in protections and processes for handling financial difficulties.