I cannot keep up with multiple debts. What is a Debt Management Plan and how do I get one?

Short answer

A Debt Management Plan (DMP) is an informal arrangement through which you repay your unsecured debts at a reduced monthly rate, usually administered by a debt charity or commercial debt management company. Unlike a Debt Relief Order or bankruptcy, a DMP is not a formal insolvency process — it is a voluntary agreement with your creditors, who may or may not freeze interest. Free DMP providers (such as StepChange) offer the same service as commercial providers but without fees.

A DMP is suitable for people who have enough regular income to repay their debts, but need more time and a lower monthly payment to do so. If your debts are very large relative to your income, a formal insolvency option (DRO, IVA, or bankruptcy) may be more appropriate.

1 The rule

Debt Management Plans are not regulated by statute but creditors' conduct is governed by

While the DMP itself is informal, debt management companies that administer DMPs for consumers must be authorised by the Financial Conduct Authority. The FCA's Consumer Duty (effective 2023) requires firms to treat customers fairly and not exploit vulnerability. Always check a debt management provider's FCA registration before engaging them.

2 What you can do now

1. 01
   Assess your income, expenses, and total debt

   Before contacting a DMP provider, gather: a list of all your debts (creditor name, balance, minimum payment, current arrears, interest rate); your monthly income (take-home pay, benefits, other income); and your essential monthly expenses (rent/mortgage, council tax, food, utilities, transport, insurance). Calculate your "surplus income" — what is left after essential expenses. This figure is what you can realistically afford to pay towards your debts each month. A DMP will divide this surplus between your creditors in proportion to what you owe each one. Use <a href="https://www.stepchange.org/debt-info/debt-management-plan.aspx" target="_blank" rel="noopener noreferrer">StepChange's online budget tool</a> for a clear picture.

2. 02
   Contact a free debt advice service

   Always start with a free, charity-based debt adviser before considering a commercial provider. Free services include: <a href="https://www.stepchange.org/" target="_blank" rel="noopener noreferrer">StepChange Debt Charity</a> (online or phone); <a href="https://www.citizensadvice.org.uk/" target="_blank" rel="noopener noreferrer">Citizens Advice</a>; <a href="https://www.nationaldebtline.org/" target="_blank" rel="noopener noreferrer">National Debtline</a>; and <a href="https://www.moneyhelper.org.uk/" target="_blank" rel="noopener noreferrer">MoneyHelper</a> (the government's free financial guidance service). A free adviser will review all your options — not just DMPs — including whether a Debt Relief Order (see the <a href="/news/debt-relief-order-threshold-increase" class="body-link">DRO threshold increase news item</a>), an IVA, or bankruptcy is more appropriate for your situation. Commercial DMP providers charge fees that are taken from your monthly payment — meaning less goes to creditors and repayment takes longer.

3. 03
   Set up the DMP and notify creditors

   Once you have chosen a provider, they will: draft a budget and proposed monthly payment; contact each creditor on your behalf with details of the DMP; request that creditors freeze interest and charges; and receive your monthly payment and distribute it between creditors. Creditors are not obliged to accept a DMP or to freeze interest — but in practice most mainstream consumer creditors co-operate, as it is better than the alternative of the debtor going bankrupt. Your DMP provider will chase non-co-operating creditors and can advise whether a formal insolvency option is better for that particular debt.

4. 04
   Maintain the plan and monitor progress

   Stick to the agreed monthly payment — missing payments can cause creditors to withdraw their agreement and resume interest. Review the plan annually with your provider, especially if your income changes. Any windfalls (inheritance, a tax refund, a pay rise) should be considered for lump-sum offers to creditors — a "full and final settlement" at a discount to the outstanding balance is sometimes negotiable when creditors see the alternative is years more of DMP payments. Keep records of all payments. Once all debts are repaid, check your credit record to ensure the accounts are marked as settled. The effects of a DMP on your credit score persist for six years from the date each account was defaulted.

3 When this does not apply

• Secured debts: a DMP covers unsecured debts only (credit cards, personal loans, overdrafts, catalogue debts). Mortgage arrears, hire purchase, and secured loans require separate negotiation with the lender.
• Priority debts: council tax, income tax, child support, and criminal fines should always be paid first — they carry more serious consequences for non-payment (including imprisonment for council tax). A DMP is not the right tool for priority debts.
• Statute-barred debts: a debt that is more than six years old and has not been acknowledged in writing or part-paid may be statute-barred under the Limitation Act 1980, s.5. Taking steps to repay a statute-barred debt (such as making a DMP payment) can restart the limitation clock. Take advice before including very old debts in a DMP.

4 Common questions