Know More About Debt Help, Debt Advice And Debt Management

By: Nik Jones

Recent statistics from the Insolvency Service indicated that the number of people declared insolvent fell by 11% in England and Wales last year.

Despite this fall there remains 120,000 people whose financial position reached crisis point and were in need of debt help.

With continued uncertainty over the economic recovery and unemployment on the rise the demand for local debt advice is likely to remain strong in order to deal with the estimated £1.244bn in mortgages and £208bn of other types of loans (eg credit cards) that remain outstanding.

With this in mind more than ever, the UK's indebted families need to know what options they have to deal with their debts and where they can go for debt advice. One option for those who require debt help would be to enter into a debt management plan (DMP).

What is a Debt Management Plan

A debt management plan (DMP) is an agreement between a debtor and their creditors when usual contractual payments cannot be made due to financial difficulties. It is one method of debt help.

DMPs were introduced into the UK in the early 1990s. It was a method of debt help that dealt with the fallout of unsecured lending at a time when it was very easy to obtain personal credit.

A DMP provides a structured arrangement to pay off all unsecured debts, rather than writing off some of the money as happens with more formal debt solutions like an Individual Voluntary Arrangement (IVA).

A DMP is tailored to an individual’s circumstances based on what they can afford to pay off their debts each month. The monthly payment is distributed to creditors on a pro-rata basis. As the DMP needs to be tailored to your circumstances it is essential that you seek debt advice from a regulated firm or charity so that they can provide the right debt advice and Debt Help solution to meet your personal needs.


The best thing about a DMP is that, a well-managed plan provides breathing space. It will ensure that you have money to afford everyday essentials, rather than feeling pressured to pay creditors their money first. Also by using the debt advice services of a regulated firm, they will be the contact point for your creditors, not you or your family.

There are some disadvantages. A DMP is an informal solution, so creditors do not have to accept the plan - although the vast majority do - and a few do not freeze interest or fees. This again demonstrates why receiving the right debt advice is essential as you will want the plan to be right for you.

Setting up a DMP

If after seeking Debt Help you believe that a DMP is suitable for your circumstances you can arrange it yourself. It will involve producing a budget - listing income, expenditure and debts - to show what money is available after essentials, utilities and priority bills are accounted for. Following this you would have to speak to each of your creditors in turn and ask them to accept a lower monthly payment from the surplus.

However, setting up a DMP can be a complex procedure and it can be fraught with difficulties, not least negotiating with the same lenders that are chasing you for money. For many they would rather use the services of a third party provider of debt management services. This will result in an intermediary between you and your creditors.

Another benefit of using an intermediary for debt help is that they have relationships with many of the creditors as they arrange thousands of DMPs each year. Unfortunately most debt management companies have to charge a fee for their services and this will be taken out of the monthly amount payable to your creditors. Because of this choosing the right company for your debt advice is essential.

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Nik Jones is a professional Debt Advisor at Debt Local. For any type of debt advice or debt help, call for free on 0800 044 5659.

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