What is a debt management plan (DMP)?

A DMP is a way to repay unsecured debts at a rate you can afford, usually managed by a free debt advice charity such as StepChange or National Debtline, or sometimes by a fee-charging provider. You make one monthly payment to the plan provider, who distributes it among your creditors. Creditors are not obliged to accept, but many will freeze interest and charges if you use a recognised charity.

DMPs cover non-priority debts: credit cards, store cards, overdrafts and personal loans. They do not replace payments on priority debts such as rent, mortgage, council tax, utility arrears or court fines — those must be dealt with first. A good adviser will help you budget for essentials before suggesting a DMP.

Because a DMP is informal, creditors can still take court action or contact you, though this is less common when payments are maintained through an established plan. A DMP usually appears on your credit file and can make it harder to borrow while active and for some time afterwards.

Compare a DMP with formal options if you cannot repay debts in a reasonable time. An Individual Voluntary Arrangement, Debt Relief Order or bankruptcy write off debt differently and have stronger legal effect, but also more serious long-term consequences. Free advice through gov.uk's MoneyHelper service helps you choose the right route.