Debt Management

A Debt Management Plan (DMP) is an informal debt repayment arrangement, available in the United Kingdom, between a debtor and their creditors.

Debt Management Plans can be proposed by the debtor themselves or by a third party debt management organisation such as us at Debt Management Solutions. Essentially, Debt Management Plans are a negotiated agreement between the debtor and their creditors with respect to an acknowledged outstanding debt that cannot be paid within the contractual agreements originally signed by the debtor.

For many people in the UK a Debt Management Plan is seen to be a way in which they can offer to repay what is owed to their creditors at a repayment rate that reflects the realistic affordability of the debtor.

However, as creditors are under no obligation to accept or agree to the terms offered by a debtor many DMPs do not actually achieve debt resolution for the debtor. This is largely due to the fact that the balance of power lies completely with creditors when deciding whether to reduce interest charges or late payment fees. The debtor usually has no ability to influence the decision of the creditors and this ultimately results in many debtors facing higher debt levels upon entering a DMP due to continuously accruing interest and late payments fees.

In the UK debt advisors such as us at Debt Management Solutions are now promoting the Individual Voluntary Arrangement (IVA) as a better alternative to both Debt Management Plans and bankruptcy. An IVA is an official debt repayment plan that in most cases includes the freezing of interest, reduction in the total amount of debt owing, and legal protection from creditors as long as the terms of the IVA are adhered to.