When looking at options and solutions as to how to repay debts, many people look to a Debt Management Plan or DMP.

Basically a DMP is a repayment scheme where you pay what you can afford each month to your debts, not what each creditor may be asking you to pay.

What you can afford to pay is determined by completing a detailed income and expenditure and the surplus of income you have after your basic living expenses is what is offered to your creditors on a pro-rata basis; which means the creditors with the largest amount of the debt, receives the larger payments.

If after doing an income and expenditure form it reflects that you have very little to offer to the debts, you can consider a token payment arrangement of a few £’s each month, or possibly bankruptcy; this would also depend on if you owned a property, and also the type of job you may have.

One of the beauties of a DMP is it can be flexible, meaning of you can afford to pay more one month you can do so, or if you cannot afford to pay the full payment, you can pay less.

One of the downsides of a DMP is that it is not a legally binding arrangement, it is an informal plan; however most of your creditors will work with you, especially if you are working with a third party to assist you in this.

As for finding a third party to assist you in a debt management plan, there are literally hundreds around, and the majority do charge some sort of a small fee to administer this plan for you.

The key is to find a company you feel comfortable with and that only charges a modest fee.  Some charge a flat fee each month, which I feel is good, and some charge a percentage, which can also be fine.

As for setting up the plan, many will take the first month’s payment as a fee to cover their costs of setting the plan up, however they will still contact your creditors immediately to advise them you are in a DMP.

The relatively small amount of companies that do not charge a fee, are usually funded by the creditors. Which is fine, you just need to be aware the company that is supposedly on your side or looking out for your interest is being paid by the very company that wants you to pay them and is collecting the debt.

Just be aware.

Is a Debt Management Plan the right option for you?  CLICK HERE