Debt Management
A Debt Management Plan (DMP) is an arrangement between a debtor and a number of creditors, usually two minimum. The plan will allow a debtor to pay their debts in full, over a set period of time in monthly payments. In return, most creditors will aknowledge that their customer is struggling to repay their borrowings, and will significantly reduce interest charges and late payment fees, so long as the debtor keeps up with their repayments in the DMP.
It is possible for a debtor to organise their own DMP with their individual creditors, however, if the debtor has a number of creditors, and would like to consolidate the debts into one payment, they may wish to seek help in the form of an experienced debt management and consolidation company.
Debt management organisations will usually charge a fee (generally 15-20% of each monthly payment), however, their relationships with the creditors will ensure that you obtain the best possible deal with regards to lowering interest and dropping charges. They will also administer the monthly payments and distribute them amongst your creditors and also provide you with balances. They will guide you through the process, and help you to obtain a new clean bank account, amongst other things, so your wages will not be affected and you can continue to make payments to your DMP.
The minimum accepted debt level to enter into a DMP is usually £2000 split amongst at least 2 creditors. You can enter into a DMP even if you are unemployed or receiving the vast majority of your income through benefits. You will need to contribute at least £80 per month to ensure your debt management plan is viable, however, in most cases, this figure will generally be higher.
If your debt level is above £15,000, you are in employment, own a home, have a job and a disposable income level of above £200 per month (excluding any payments to secured borrowings) you may well find that an IVA is a more suitable arrangement, as this will reduce the overall amount that you have to repay.
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