When trying to find solutions to getting out of debt, there are many, however, not every option is best suited for each person. It can depend on their full set of circumstances.

Some questions that need to be addressed prior to someone being advised to which is the best course of action to get out of debt are:

The answers to these questions, will help guide you as to which debt relief programme is best for you and your set of circumstances.

Before we get into the details of what a Debt Management Plan or DMP is, let’s look at some of the reasons someone may want to consider a DMP, and also why someone may NOT want to consider a DMP.

When Not to Consider a Debt Management Plan

When to Consider a Debt Management Plan

Debt Management Plans Explained

A Debt Management Plan is an informal agreement between you and your creditors, which allows you to pay what you can afford each month towards the accounts. It is asked that your creditors freeze the accounts to any new interest and charges, but as an informal agreement, your creditors are not bound to do this. However, the majority of creditors will work with you, and freeze the accounts.

You can set-up a DMP yourself, however, DMP’s are usually set-up by third parties, and some charge a small fee each month to administrate the plan, however there are charity/non-commercial organisations that will do this for you for free.

A detailed income and expenditure sheet is prepared, and along with a proposal outlining who you owe and how much you will be paying each month, is sent to your creditors.

Once your creditors agree to the proposal, you make monthly payments.

Here is an example of how a Debt Management Plan works:

You owe 4 creditors the following:

So in total you owe £10,500.

After completing an income and expense form which details all of your monthly expenses, you have £150 left as surplus each month.

This surplus income would be used as payments to your creditors in the following manner, as the percentage of the surplus £150 paid to your creditors based on the balances.

These are close estimates, but you get the idea.

As you make the payments each month the balances will reduce as there are no additional interest or charges being applied to the accounts.

As you pay off one account, you continue to pay the £150 a month, however the payment that was applied to the account now paid off, will be applied to another account, to pay it off at a faster rate.


Think of it as a snowball rolling down a hill, picking up more snow as it goes, getting larger until it reaches the bottom of the hill.

As you pay an account off, you pay more to another account, and so forth until you are debt free.

Debt Management Plans are a good stepping-stone to sort out your debts, and are also good if you own property that you may lose if you were to go bankrupt.

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