Debt Management Plan (DMP)

Debt Management Plans, which are known as DMPs for short are an effective way to get your finances back in order. They allow you to pay what you can afford though a flexible plan that adapts to your circumstances. They are not legally binding and are usually for debts up to £15,000. For larger debts, an IVA or Trust Deed may be more appropriate, if you are unsure, please call for friendly advice on 0800 043 2332.

How a Debt Management Plan (DMP) works

Following an in depth financial assessment, we will contact all of your creditors (the companies to which you owe money) to find out what exactly you owe. We will also assess what you can afford to pay based on your income and expenditure, this amount is known as your disposable income (DI). This is what you will pay into your Debt Management Plan regardless of what you owe.

All outstanding unsecured debt is then bundled together and we pay out each month to your creditors in proportion to the amount that you owe to each of them. Don’t worry if you are struggling, please see the below example of a Debt Management Plan.

Debt Management Plan (DMP) example

Mary is a single mother from Manchester with a two year old daughter. She works 16 hours a week in a shop and claims benefits. She built up credit card debt whilst she was pregnant and once the baby was born on necessities.

Before her Debt Management Plan

Mary owed money to 3 lenders for credit cards, see the figures below:

NatWest – £4,550 with a minimum payment of £136.50

Lloyds TSB – £2,130 with a minimum payment of £63.90

Barclays – £890 with a minimum payment of £26.70

Her total debt was £7,570, she was trying to pay a minimum of £227.10 per month and even at this rate it would take her around 14 years to clear her cards.

Unfortunately, she was regularly unable to afford to pay the minimum meaning that she missed payments and was charged for this, at up to £30 a time, this was increasing her debt each month rather than allowing her to reduce it.

During her Debt Management Plan

After contacting us, we assessed her disposable income (DI) at £150 per month, this is what she pays each month into the plan, she is able to afford this as it is based on her circumstances, not what she owes.

NatWest is paid £69.00 based on 60% of total debt

Lloyds is paid £32.20 based on 28% of total debt

Barclays is paid £13.80 based on 12% of total debt

Fees come to £35

Additionally, as we were able to freeze the interest and charges with all three lenders, the amounts that are paid are paid directly off what she owes. In this case we were also able to reduce the term to 5 years 6 months.

If a Debt Management Plan from Chiltern seems to be the solution to your problems, call us now on 0800 043 2332 now.

Benefits of a Debt Management Plan (DMP)

A Debt Management Plan will:

Combine all your unsecured debts into a single monthly payment based on your circumstances
Depending upon the outcome of negotiation with your creditors, reduce or freeze interest and charges on what you owe
Give you someone who understands and has a good relationship with the creditors who can deal with them on your behalf
Significantly reduce the correspondence with your creditors
Put you back in control of your finances so you know where your money is going each month

Potential drawbacks of a Debt Management Plan (DMP)

Debt Management Plans are not for everyone, you are best to seek advice form a professional if you are unsure. You should be aware that a Debt Management Plan may:

Extend your payments over a longer term in some cases
Not always result in the reduction of interest or charges for every creditor
Not necessarily stop all correspondence or phone calls from creditors
Not cover any debt secured on assets or tax arrears

Fees & Information

We cannot guarantee a reduction in interest or charges. If an IVA is not maintained it could lead to bankruptcy. Whilst initial debt advice is free, fees will be charged if a solution is taken out.

Fees related to Debt Management Plans are in two parts;

"Initial Fee" means your first two "Monthly Payments", which is paid by You to "Us". This represents our fee for establishing your arrangement, and therefore is not distributed to your creditors, and can be paid in two separate instalments. Retention of this fee will put you into further arrears.

"Monthly Fee" means the Fee payable for our Services each month. This is an amount equal to 17.5% of your "Monthly Payment" (apart from your first two "Monthly Payments" which is the "Initial Fee"), subject to a minimum payment of £30 for disposable incomes of 0 - £100, and £35 for disposable incomes of £100.01 - £200.

Fees incurred for Individual Voluntary Arrangements are variable dependent upon the monthly contribution to the arrangement and the agreement that is reached with your creditors. Fees are made up of Nominees fees relating to assistance given to prepare your proposal and Supervisor fees which relate to the ongoing monitoring of your IVA. Fees are already included as part of your monthly contribution. The level of fees and the method of payment are both agreed by your creditors at the outset of the arrangement.

A record of your agreement with us will be held on your credit file for up to six years, and your ability to obtain credit in future may be affected.

You are provided a cooling off period of fourteen days from the date the agreement was deemed to commence, during which you may cancel our agreement. Should you give notice to us that you would like a refund of a payment, or payments, (being other than the initial fee) then where no distributions have, at that time, been made by us, or are in the process or course of being made by us, in respect of that payment or payments this will be made in full (i.e. without deduction of our fee of 17.5%).

DEMSA/OFT Approval