What is a debt management plan?

A DMP suits people who can afford to repay what they owe, just not at the rate their credit agreements demand. It is not legally binding on you or your creditors, which is both its strength (it is flexible) and its weakness (creditors can still take action).

Free, impartial debt advice is available from MoneyHelper, StepChange, Citizens Advice and National Debtline, and several of them set up DMPs without charging. See where to get free debt advice.

How does a debt management plan work?

A provider goes through your income and essential spending with you, works out what you can afford, and writes to your non-priority creditors asking them to accept reduced payments. You then make one payment a month to the provider, who shares it between your creditors.

The payment has to leave you enough for your essential costs, including priority bills. If your income or costs change, ask your provider to look at it again: a plan you cannot keep up is no use to anyone.

A DMP has no fixed length. It runs until the debts are repaid, or until you change to another solution.

Which debts can go in a DMP?

gov.uk says DMPs can only be used for unsecured debts. Typical examples are credit cards, store cards, personal loans, overdrafts, payday loans, catalogue debts and money owed to friends or family.

Mortgages and loans secured on your home are not included. Nor are priority debts, which are the debts with the most serious consequences if you do not pay: rent and mortgage arrears, council tax, energy bills, court fines, child maintenance, TV licence, tax owed to HMRC and some hire purchase. Your adviser should build payments towards those into your budget before working out what is left for the plan.

A common mistake, repeated on many websites, is to say priority debts are “secured debts”. They are not the same thing. Council tax arrears are unsecured, but they are a priority because the council can use enforcement agents (bailiffs) to collect them.

Do you have to pay for a debt management plan?

No. Free DMPs are available from StepChange, PayPlan and through National Debtline’s partner. Some companies charge a set-up fee and a handling fee each time you make a payment, which means less of your money goes to your creditors and the plan lasts longer.

Whoever runs your plan must be authorised by the Financial Conduct Authority for debt counselling and debt adjusting. Authorised, not “accredited”. You can check any firm on the FCA register.

Will creditors freeze interest and stop chasing you?

Often they do, but they do not have to. This is the biggest difference between a DMP and formal options such as an IVA.

gov.uk says that, unless the agreement says otherwise, your creditors can still ask you to pay the full debt later and “take action to recover their money even if you keep up your payments”. In practice many creditors accept a reasonable DMP, but some keep adding interest, pass accounts to debt collectors or go to court.

If a creditor does take you to court, the county court can make a judgment ordering you to pay. You can ask the court to set payments at the same level as your plan, but the judgment itself stays on the register for 6 years from its date unless you pay in full within a month.

How does a DMP affect your credit file?

There is no DMP entry as such. What appears depends on what each creditor reports. Most will add an “arrangement to pay” marker or register a default. A default stays on your file for 6 years from the date of the default, even if you later pay it off.

That has a counterintuitive side. If your accounts default early in the plan, they drop off your file 6 years after the default date, even if the plan is still running. Accounts that carry an arrangement marker instead of a default can show it for as long as the reduced payments continue.

You may read that a DMP “won’t be registered on your credit file”. That is misleading: it will usually affect your score, sometimes for years.

DMP or something else?

A DMP has real advantages if you can afford it: you keep control, there is no public insolvency record and you can stop at any time. It may not be the best fit if:

• the plan would take so long that you are unlikely to finish it (see the example above)
• your creditors will not freeze interest, so your payments barely touch the balance
• you have very little spare income and few assets, in which case a debt relief order may be available for free
• you need legal protection from creditors, which only formal options give.

An IVA is legally binding and writes off what is left at the end, but it costs more in fees and it is an insolvency. The IVA Protocol 2025 says that if a DMP could clear your debts over a similar period with a significantly higher return to your creditors, a protocol IVA is unlikely to be suitable. Our IVA vs debt management plan guide works through examples. For the full range, see debt solutions compared.

In Scotland the legally binding equivalent is a Debt Payment Programme under the Debt Arrangement Scheme: see debt solutions in Scotland.

What people commonly get wrong

• Thinking a DMP is legally binding. It is not, on either side.
• Stopping payments to creditors while waiting for a plan to start. Keep paying what you can, and tell creditors you are getting advice. If you need time, ask the adviser about Breathing Space, which pauses interest and action for up to 60 days.
• Paying fees without checking whether a free provider would take you on.
• Leaving out priority debts. They need a separate plan, not a place in the queue.
• Consolidating instead. A consolidation loan can lower payments, but it is more borrowing. If you are already struggling, get advice before you apply.

What to do next

1. Write down every debt, who it is owed to and the balance, and gather recent bank statements and payslips.
2. Contact a free debt adviser to check whether a DMP is realistic, and to look at your other options at the same time.
3. If you choose a fee-charging provider, ask how much of each payment goes to fees and check the firm on the FCA register.