Debt Management Plan (DMP)

Debt Management Plan (DMP)s are a flexible way to sort out your finances. They can change when your circumstances do, giving you better control whilst still making positive steps to reduce your debt. DMPs are usually for people wit h£15,000 debt or less, though this depends on exact circumstances. In cases of £7,000 or more you may find that an IVA or Trust Deed could be more appropriate, if you are unsure, please call today for confidential, helpful advice on 0800 083 4646.

How does a Debt Management Plan (DMP) work?

We will assess your income and expenditure and calculate what is known as your disposable income or DI. Then we speak to the companies you have borrowed from, known as creditors, in order to check the exact amounts that you owe. You will pay into the Debt Management Plan only what we assess your DI to be.

Your debts are grouped together and paid by us in proportion to each individual debt compared to the total. If this is a little confusing please don’t worry, an example is below.

Debt Management Plan (DMP) example

David is a butcher, his wife died 5 years ago and she dealt with the finances. His children have grown up and moved out. He didn’t realise how bad his finances were until he got a knock at the door from a collections officer.

Finances before his Debt Management Plan

David owed money to 2 lenders for credit cards and has a loan, see the figures below:

Royal Bank of Scotland (loan) – £11,490 with a payment of £324.79

Royal Bank of Scotland (credit card) – £620 with a minimum payment of £18.60

Halifax – £1,923 with a minimum payment of £57.69

His total debt was £14,033, £324.79 was taken regardless of his circumstances from his current account each month and he has additional repayments of £76.29 to find on top.

He had missed two payments on each credit card as his savings were now gone. The loan was taken out in joint names with his wife and it was not protected, leaving him liable for the full amount despite no longer having two incomes.

Finances during his Debt Management Plan

After contacting us, we assessed him to be able to afford £240 per month, which is what he now pays into his DMP.

Royal Bank of Scotland is paid £170.28 based on 86% of total debt

Halifax is paid £27.72 based on 14% of total debt

Fees come to £42.00 per month

In this case we are able to negotiate the freezing of interest and charges. This means that what he pays come off what he owes, whilst his term has become a year longer, he can much more easily afford to make the payments.

Hamilton Locke can help you in the same way as in this example, to speak to one of out trained advisers, please call now on 0800 083 4646.

What are the benefits of a Debt Management Plan (DMP)

A Debt Management Plan will:

• Bring together all of your debts so that you will pay only one monthly payment based on an assessment of your circumstances
• Under the right circumstances freeze your interest and stop charges
• Give you a contact to deal with your creditors on your behalf
• Give you back control of your money

Are there any drawbacks to a Debt Management Plan (DMP)

A Debt Management Plan may not be the right solution for you, you should always seek professional advice before entering into any financial plan. Things to be aware of about a DMP are that under certain circumstances they may:

• Increase the term of your repayments
• Depending on negotiations, not reduce interest and charges with your creditors
• Stop most, but not all correspondence from your creditors
• Only include unsecured debts