A DMP is an informal financial arrangement between a debtor and their creditors to repay debts at a more manageable rate. It involves consolidating multiple debts into a single monthly payment. Be aware that a DMP does not guarantee protection from creditors taking further action against you. However, in general creditors do cease further action when a DMP is put in place.

Unlike debt consolidation loans or bankruptcy, a DMP does not provide new credit or discharge debts. It’s a structured repayment plan that helps individuals repay existing debts over an extended period.

DMPs are typically suitable for individuals with unsecured debts, such as credit cards and personal loans, who are struggling to meet their monthly payments.

A debt management company negotiates with creditors on your behalf to agree on lower interest rates (often set at 0%) and more affordable monthly payments. You then make a single monthly payment to the agency, which distributes the funds to your creditors.

The duration of a DMP varies depending on individual circumstances, but it typically ranges from three years upwards. The goal is to make it financially feasible for the debtor to repay their debts.

Initially, enrolling in a DMP may have a negative impact on your credit score. However, as you consistently make on-time payments, and as the plan progresses, your credit score can start to recover.

While creditors may contact you initially, they generally cooperate with the DMP once the terms are agreed upon. The DMP serves as a communication bridge between you and your creditors.

DMPs primarily cover unsecured debts, such as credit cards, personal loans, and medical bills. Secured debts like mortgages or car loans are usually not included.

It’s crucial to communicate promptly with your debt management company if you encounter financial difficulties. They may help renegotiate terms with creditors or provide guidance on alternative solutions.

It’s advisable to avoid taking on new credit during a DMP. However, some debt management companies may provide guidance on responsible credit use and budgeting.

Yes, doing your own DMP gives you more control over your finances and can also save you administration fees and ongoing fees often charged by debt management companies. On Johnny Debt you can find information on doing your own DMP.

It is not unusual for a creditor to accept a minimum token payment of a of £1. Your budget planner (available from Johnny Debt) will calculate how much disposable income is available and then calculate how much each creditor will get on a pro-rata split.

Yes, entering into a Debt Management Plan (DMP) can be a reasonable option if you need more time to assess and decide on a final debt solution. So, if you feel as though you are under extreme creditor pressure and need more time to research the best final debt solution, then a 2 step debt approach is a good idea.