How Does A Debt Management Plan (DMP) Work? StepChange (2024)

A debt management plan (DMP) is an agreement between you and the people you owe. You make an affordable monthly payment that is shared among your debts.

A DMP is usually set up and managed by a third party, like:

• A debt charity
• A debt management company

Your DMP provider helps you make a budget.

• This shows how much you can afford to pay to your debts after:
  
  • Priority payments and
  • Living costs
• Any money left over is shared fairly between the people you owe

You make a monthly payment to your DMP provider and they pass on the correct payments to the people you owe.

Is a DMP right for me?

Use our online debt advice tool to work out the best way to deal with your debt problem.

We can arrange a debt management plan if it is the best option for you.

As a charity, our debt management plans are free.

The most important thing is to make sure you can afford your living costs while paying off your debts.

We build a budget to make sure you can afford your household bills and DMP.

DMPs with StepChange Debt Charity

We work out what you can afford to pay to your debts and make sure you are happy with the plan.

When you are ready, we will:

• Contact the people you owe
• Explain your situation
• Tell them what you will pay through the DMP

Send us a payment each month and we do the rest.

You do not have to worry about speaking to the people you owe. We do it for you.

We will support you through the whole process.

Any debt management company you work with should make payments to the people you owe for you.

What are the benefits of a DMP?

There are some benefits of a DMP if it is the right thing for you:

• If your DMP is free:
  
  • All the money you pay into it goes towards your debts
  • DMPs with StepChange are free
• You make one monthly payment
  
  • This is set at an amount you can afford
• You are not tied into the agreement
  
  • You can leave the DMP agreement if you want to
• A DMP is flexible
  
  • It can be changed if your income or living costs change

Risks with a DMP

Risks of a DMP include:

• It takes longer to repay your debts
  
  • Because you make reduced payments
• Interest or charges may not stop on a DMP
  
  • They could be added to your debt
  • This makes the total you pay back higher
• Making reduced payments on a DMP affects your credit rating
  
  • Even if the people you owe accept the DMP
• The people you owe could still take further action
  
  • Like passing your debt to a collection agency or starting court action

• Is an IVA or DMP right for you?
• Managing a DMP
• Setting up a DMP