Free Debt Management Plans

A Debt Management Plan (DMP) is very similar to self-negotiation. However, instead of writing to the creditors and sending payments yourself, a company does it for you. You will pay one payment to the debt management company every month, and they will contact the creditors and pay the money for you. You can only use a DMP to pay ‘unsecured debts’. These are debts which are not guaranteed against your property.

There are lots of companies who offer a debt management service but most of them will charge you. There are two organisations that offer debt management plans free of charge. They are called PayPlan and StepChange.

Important points to remember about a debt management plan:

• You have to be able to pay the same amount to the debt management company every month.
• None of the debt is written off. Depending on how much you owe and how much you can afford to pay every month, it may take much longer to pay back your debts.
• A DMP is not legally binding on you, so you can stop it at any time.
• A DMP is not legally binding on the creditor so they don’t have to accept your offer.
• A DMP will also affect your credit rating as you are making reduced payments. This means it will be harder for you to get credit again in the future if you need it.