Definition
Debt management plan (DMP)
A debt management plan is an informal agreement between you and your creditors, usually arranged through a free debt charity, to repay your debts at a reduced rate based on what you can genuinely afford. It is not legally binding, but many creditors agree to freeze interest and charges while you are on a plan.
Example
A debt charity helps you negotiate a DMP, reducing your monthly debt repayments from £600 to £250 based on your disposable income.
Common misunderstandings
- A DMP is different from a debt consolidation loan — no new borrowing is involved.
- Creditors are not legally required to agree to a DMP, but many do when arrangements are made through a recognised charity.