What Is a Debt Management Plan (DMP)?
Last Updated: July 2026
Your complete guide to Debt Management Plans in the UK. Understand how this flexible, informal solution can help you manage your debts.
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Calculate Your DMP PaymentWhat is a DMP?
A Debt Management Plan (DMP) is an informal agreement between you and your creditors to pay back your unsecured debts. It is not a legally binding solution like an Individual Voluntary Arrangement or bankruptcy.
With a DMP, you make one single, affordable monthly payment to a DMP provider. They then distribute this money amongst your creditors. The provider will also try to negotiate with your creditors to freeze interest and charges, although this is not guaranteed. You continue making payments until your debts are paid in full.
Informal Agreement
Flexible and not legally binding, so you can stop or change it at any time.
No Fixed Term
The plan continues until your debts are fully repaid, which can take several years.
Single Payment
Consolidates your debt payments into one manageable monthly amount.
How Does a DMP Work?
- Get Debt Advice: A debt advisor will review your finances in a free debt assessment to see if a DMP is your best option. Free providers include StepChange and Citizens Advice.
- Create a Budget: The advisor helps you create a detailed budget, often utilizing a household budgeting tool, to work out your affordable monthly payment.
- Provider Contacts Creditors: Your DMP provider contacts your creditors with the repayment offer and asks them to freeze interest and charges.
- DMP is Active: You start making your single monthly payment to the provider, who then pays your creditors for you.
- Regular Reviews: Your financial situation is reviewed regularly (usually annually) to ensure the payment is still affordable.
- Completion: The plan ends once all debts included have been paid off in full.
Pros and Cons of a DMP
Advantages
- It's a flexible solution; you can increase payments or stop the plan.
- You make one manageable monthly payment.
- It's not a formal insolvency, so it's less damaging than bankruptcy.
- Free DMPs are available from debt charities.
Disadvantages
- It's not legally binding, so creditors can still take action.
- Creditors do not have to freeze interest and charges.
- It can take much longer to become debt-free than with other solutions.
- It will negatively affect your credit rating.
- No debt is written off; you must repay the full amount.
How DMPs Are Regulated
While the Debt Management Plan itself is an informal and not legally binding agreement, the organisations that set up and administer them are strictly regulated. All DMP providers must be authorised by the Financial Conduct Authority (FCA) for debt adjusting and debt counselling.
Under FCA CONC (Consumer Credit sourcebook) rules, providers must act in your best interests, ensure the plan is suitable for your situation, and maintain strict fee transparency. If you use a fee-charging provider, FCA rules cap their fees at a maximum of 50% of your monthly payment in the initial months. However, fee-free providers (like StepChange, National Debtline, or PayPlan) pass 100% of your payments directly to your creditors.
Always verify a provider by checking the FCA Register before sharing any financial details or committing to a plan.
Priority Debts vs Non-Priority Debts
A crucial factor to understand is that a DMP is only designed to cover non-priority debts, such as credit cards, personal loans, and overdrafts. It cannot be used for priority debts, which include your mortgage or rent, council tax, energy bills, court fines, and child maintenance.
Priority debts must always be paid first because the consequences of missing these payments are much more severe, potentially leading to eviction or imprisonment. A reputable DMP provider will help you identify these and use a household budgeting tool to ensure your priority debts and essential living costs are fully covered before calculating your DMP payment. If you are struggling with priority arrears, you may also want to explore government debt help.
How Your DMP Payment Is Calculated
Your DMP payment is based purely on what you can afford, not what your creditors are demanding. To determine this, your advisor will calculate your disposable income by taking your total income and subtracting all your essential expenditure and priority debt payments.
This process usually follows the Standard Financial Statement (SFS) guidelines to ensure creditors accept your budget as reasonable. Once your disposable income is calculated, this amount is distributed pro-rata among your creditors. This means a creditor holding 50% of your total debt will receive 50% of your monthly DMP payment. You can use our DMP calculator to get an estimate of your potential affordable payment.
DMP Statistics and Context
DMPs are one of the most widely used informal debt solutions in the UK. Because they are not formal statutory insolvencies, they are not tracked on the official Insolvency Service registers, making exact national figures difficult to pinpoint. However, charity data highlights their prevalence.
In 2025 alone, the UK's largest debt charity, StepChange, helped 163,916 new clients, many of whom entered into Debt Management Plans. Similarly, Citizens Advice assisted over 407,000 people with debt problems during the same year. These figures underscore how common it is to need help managing unaffordable debt. You can explore more national trends in our UK household debt statistics overview, or read our DMP recovery guide if you are already on a plan.
What Happens to Interest and Charges?
When you start a DMP, your provider will write to your creditors and ask them to freeze all interest and charges. This is vital because if interest continues to be added while you are making reduced payments, your debt could actually grow.
Most major high street banks and debt collectors will agree to freeze interest to help you repay the principal sum, but it is not guaranteed. Some creditors may only agree to freeze interest after they have seen 3 to 6 months of consistent payments. Your provider should review your statements regularly to check if interest is still being applied and negotiate further if necessary.
When a DMP May Not Be Suitable
A DMP is just one of many debt solutions available in the UK, and it isn't right for everyone. If you have over £6,000 of debt, a regular income, and you want legal protection from creditors and a portion of your debt written off, an Individual Voluntary Arrangement (IVA) might be more appropriate.
Conversely, if you have a very low income (less than £75 spare per month), minimal assets, and debts under £50,000, you may qualify for a Debt Relief Order (DRO), which can write off your debts entirely after 12 months. If your debts are severe and you have no way to repay them, bankruptcy might be the only viable route. Finally, if your financial difficulty is temporary or linked to a mental health crisis, you might benefit from the statutory Breathing Space scheme or support from the Mental Health and Money Hub.
DMP and Your Credit File
Because you are making reduced payments that break the original terms of your credit agreements, a DMP will negatively affect your credit file. While a DMP is not a formal insolvency and won't appear on the public Insolvency Register, each account included in the plan will show that you are making reduced payments.
In many cases, creditors will eventually issue a default notice. These entries remain on your credit report for 6 years from the date of the default or the start of the reduced payment arrangement. This will make it significantly harder to obtain new credit, like a mortgage or car finance, during this period. However, once you complete your DMP and the 6 years have passed, you can begin rebuilding. For more details, see our DMP credit guide and visit the credit rebuilders hub for actionable advice.
Frequently Asked Questions About DMPs
What is a Debt Management Plan (DMP)?
A Debt Management Plan (DMP) is an informal agreement between you and your creditors to repay your non-priority debts. You make one affordable monthly payment to a DMP provider, who then distributes this money to your creditors on your behalf. It is not legally binding, making it more flexible than solutions like an IVA.
Is a DMP legally binding?
No, a DMP is an informal arrangement. This means creditors are not legally obliged to accept it, and they can still add interest or charges, or even take legal action. However, most creditors will agree to a DMP if it's arranged by a reputable provider. This informality also means you can change or cancel the plan if your circumstances change.
Will a DMP affect my credit score?
Yes. Because you are paying less than your original contractual payments, your creditors will record this on your credit file. This will lower your credit score and make it harder to get credit while you are on the plan. However, the DMP itself is not recorded on a public register like an IVA or bankruptcy.
How long does a DMP last?
The length of a DMP depends on the total amount of your debt and how much you can afford to pay each month. It can last for several years. Unlike an IVA, there is no fixed term and no debt is written off; you continue making payments until the debts are cleared in full.
Can I get a free DMP?
Yes. Free debt advice charities like StepChange and National Debtline, as well as organisations like PayPlan, provide fee-free DMPs. They do not charge setup or management fees, meaning 100% of your monthly payment goes directly to clearing your debt. In contrast, commercial fee-charging providers deduct their fees from your payments, which means it will take longer to become debt-free.
What's the difference between a DMP and an IVA?
A DMP is an informal agreement where you repay your debts in full over an extended period. It offers no legal protection and no debt write-off. An IVA (Individual Voluntary Arrangement) is a legally binding formal insolvency solution. It typically lasts for 5 to 6 years, provides legal protection from creditors, and any remaining unsecured debt is written off at the end of the term.
Can creditors still take action if I'm on a DMP?
Yes. Because a DMP is an informal agreement, there is no legal protection preventing your creditors from taking action, such as issuing a default notice or applying for a County Court Judgment (CCJ). However, if you maintain your agreed reduced payments through a reputable provider, most creditors will accept the arrangement and hold off on further enforcement action.
How do I choose a DMP provider?
Always start by consulting a free debt advice provider. If you choose to look at commercial firms, ensure they are authorised by the Financial Conduct Authority (FCA) by checking the FCA Register. Avoid any provider that pressures you into signing up quickly or isn't completely transparent about their fees and the potential risks to your credit file.
See What Your DMP Payment Could Be
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