Should I get a debt management plan?

A Debt Management Plan (DMP) is an informal arrangement between you and your unsecured creditors, administered by a debt management company. You make one monthly payment to the company, which distributes it proportionally to creditors. Creditors may agree to freeze interest and charges, though they are not legally obliged to do so.

Free DMPs are available through StepChange (the UK's largest free debt advice charity), Citizens Advice, and the National Debtline. You should never need to pay for a DMP. Some commercial companies charge set-up fees and monthly management fees — these come out of your payment, meaning less reaches your creditors and your debt takes longer to repay.

DMPs work best when: you have a regular income with some surplus after priority outgoings; your total debt is manageable but needs a structured repayment schedule; and you are not facing immediate enforcement action.

Limitations include: DMPs are not legally binding — creditors can withdraw from the arrangement or begin enforcement action at any time; interest is not always frozen; creditors may continue to default your accounts even while you are on a DMP (affecting your credit file); they can take many years to complete if debt levels are high.

Alternatives to consider include: a Debt Relief Order (for debts under £30,000 with minimal assets and income); an Individual Voluntary Arrangement (IVA, legally binding); or bankruptcy. Each has different consequences and suitability criteria. A free debt adviser can help you compare options.