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What is a debt management plan?

Could a Debt Management Plan (DMP) be your solution? If you have debt above £1500 to more than one creditor then a Debt Management Plan could be right for you!

What is a DMP?

Debt Management Plans are provided by debt management companies who negotiate with your creditors to change your debt repayment terms. A Debt Management Plan (DMP) can be a good debt solution, especially if your problems are likely to be short term.

There can however be some negative effects to Debt Management Plans and it's worth reading our breakdown of the advantages and disadvantages of a Debt Management Plan to get a better understanding of these.

Sometimes, especially if you don't owe very much in total, creditors may ask you to try a debt management plan before being considered for an IVA.

In a Debt Management Plan we will negotiate with your creditors to try to get them to accept lower repayments and obtain a freeze on any further interest that might otherwise be added to your current debt. We are often able to do this and, when not all creditors agree to this at the start, we will continue to negotiate with your creditors whilst you keep up the payments to you Debt Management Plan.

What are the features of a Debt Management Plan (DMP):

  • Reduce your monthly repayments
  • We handle negotiations with all creditors
  • You must be able to afford a £70 payment each month 

A Debt Management Plan works by enabling us to take one affordable monthly payment from you. It's affordable because we calculate it against guidelines that ensure you have what you need to live (things like your housing costs, children's and pets' needs, etc are all taken into account: These guidelines have been agreed with creditors and are usually accepted).

We then distribute this to all your creditors proportionately based on what they are owed - this means everyone gets their fair share.  Within these payments we do deduct our initial and, thereafter, monthly fee.  By letting us help you this way, you can pay off your debt with the comfort that although finances may tight for some time to come, you will be able to make headway and work towards a debt free future with a clear mind and head held high.

Complete our short contact form and we can help you decide if a Debt Management Plan can help you:

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Debt Management Plans are provided by debt management companies, such are ours. Within the ClearDebt Group, we manage Individual Voluntary Arrangements (IVAs) through our expert team at ClearDebt and Debt Management Plans through our team at Abacus. Our team at Abacus will negotiate with your creditors to change your debt repayment terms and look after you throughout your Plan.  A Debt Management Plan is an alternative solution to an IVA, DRO (Debt Relief Order) or Bankruptcy and will be identified to you if it is the most appropriate solution based on your personal finances and debt level.

Debt Management Plans (DMPs) can be a good debt solution, especially if your problems are likely to be short term.

A debt management plan can be put in place by a debt management company or made by yourself ("self help debt management"). Sometimes commercial and charitable (free) debt management plans are simply a step on the road to bankruptcy, offered to debtors who are terrified of the word insolvency. However in many circumstances they can be an appropriate solution, especially if you can nearly pay all your debts or if you strongly believe your problems will be short term.

Who is a Debt Management Plan suitable for?

Every individual's circumstances are different so click here to view some of our debt management plan case studies which show how a debt management plan worked an individual who was self employed and didn't want to risk the equity in his home, a couple who were expecting a baby and somebody who found themselves in debt because of illness.

Debt Management Companies

Commercial debt management, with a debt management company, is similar to self help debt management except that someone else is doing it for you. There are many different firms offering this service and most charge a fee. Some are overtly commercial (like us - anyone who is must not pretend to be a charity); some (even a major charitable one) are funded by the banks and credit card companies themselves.

What are Debt Management Plan Fees?

Debt management companies will usually ask you to pay them as much as you can afford. They may negotiate with your creditors to accept lower repayments or obtain interest freezes. Commercial Debt Management companies are often able to do this - it isn't only the debt management charities, who offer free debt management plans, that succeed here. They pass the money to your creditors less their initial and, then, monthly fee.

Read about our debt management fees.

Debt management companies also take the single payment from you each month and distribute it to your creditors within five working days. Sometimes a charity will give you great advice but no help in distributing your money to the people you owe.

What is self help debt management?

Self help debt management involves you renegotiating your payment terms with your creditors. If your debts are not so serious and you approach your creditors first to deal with your problems you will usually find them sympathetic and helpful to you. If you leave the debt management process until they threaten to take action against you it is often much harder to negotiate with them. You need to be tough to negotiate a good deal - often; they will refer you to a debt management company or charity in any case.

Take care though; some of the debt management plans we have seen, even from the more public-spirited providers, are scheduled to last more than 10 years and often only reduce debt by small amounts, compared with an IVA which, usually on a very similar monthly payments, ensures you are debt free, more often than not, in five years.

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The Government's Insolvency Service have put together a debt guide which you can download now as a pdf document here: In Debt? Dealing with your Creditors

ClearDebt proposes and administers Individual Voluntary Arrangements (IVAs) on the basis that there is a reasonable contemplation of an insolvency appointment and hence, only provides advice once it is apparent that an IVA is likely to be the most appropriate debt solution.

Abacus is authorised and regulated by the Financial Conduct Authority and is permitted to offer debt counselling and debt adjusting services for a fee. Reg. No.482265.

You can find out more about dealing with your creditors in a guide produced by the Insolvency Service: In Debt - Dealing with your creditors.
You can also find alternative free-to-consumer debt advice organisations as recommended by the Money Advice Service.

Abacus registrations are as follows: Registered in England & Wales No. 03907493. Claims Management Regulation No. CRM19025. Data Protection Act 1998 registration number Z9487675.
ClearDebt registrations are as follows: Registered in England & Wales No. 05157741. Data Protection Act 1998 registration number: Z8927124.

David Emanuel Merton Mond is licensed to act as Insolvency Practitioners in the UK by the Insolvency Practitioners Association.
Elaine Masters is licensed to act as an Insolvency Practitioner in the UK by the Institute of Chartered Accountants in England and Wales.

Registered Office for both companies is: Third Floor, Nelson House, Park Road, Timperley, Altrincham, Cheshire WA14 5BZ.