Debt Management Plans

A debt management plan is an effective way to consolidate personal debt, repay creditors and reorganise your personal finances.

If you’ve racked up mounting credit card bills and unsecured loans, then a debt management plan could be your route back to financial security.

What Happens in Debt Management Plans?

A debt management plan is often organised for individuals who are struggling to pay back personal, unsecured debts. This includes things like credit card bills, benefits repayments (DWP debt management plans are available) and taxes.

How Does a Debt Management Plan Work?

Debt management plans consolidate all of your unsecured loans into one debt repayment plan. This plan is effectively an agreement between you and your creditors, and it may allow you to lower the interest rates or the total debt that’s owed. The plan sets out a detailed repayment schedule that aims to have you pay the debt in full within a specified time.

This means that if you owe money to multiple creditors, such as a credit card company and HMRC, you would only need to make one repayment per month to the debt management plan provider until you’ve paid everything off.

How Long Do Debt Management Plans Last?

Debt management plans are tailored to individuals, so the length of time it lasts will depend on your financial situation. Generally speaking, the minimum timeframe will be one year, but it could also last as much as five years. The more debt you have, the longer you’ll make repayments

Does a Debt Management Plan Affect Your Credit Rating (or Credit Score)?

If you’re struggling to repay your personal debts, it’s likely your personal credit rating has already dipped. In this scenario, a debt management plan isn’t going to worsen your credit rating. In fact, if you stick to the terms of your debt management plan and meet your repayment schedule, your credit score will improve over time.

Can Creditors Refuse a Debt Management Plan?

Creditors have no obligation to take part in a debt management plan. Individual creditors are within their rights to refuse, in which case, you could find yourself continuing to pay back certain debts in addition to a debt management plan. However, it’s well within the financial interests of a creditor to join a debt management plan, as they are more likely to see their money repaid than if they refuse.

Is it Worth Doing a Debt Management Plan?

Whether a debt management plan is a good or bad idea depends on your personal financial circumstances. It’s an effective option when you have large unsecured debts that are owed to multiple creditors, as debt management plans allow you to consolidate these. If you have secured debts, such as a mortgage or car loan, then you’ll need to consider other options such as an Individual Voluntary Arrangement (IVA).

How Can Irwin Insolvency Help with Debt Management Plans?

If you’re struggling to pay your credit bills or personal debts, then Irwin Insolvency’s experienced team are here to help. As part of our debt management services, we can organise debt management plans that could save you from financial insecurity.

Contact Irwin Insolvency today to find out more.

Alternatives to Debt Management Plans

If you are open to suggestions on how best to deal with your debt, Irwin Insolvency offers a range of alternatives to debt management plans – such as Debt Relief Orders and Individual Voluntary Arrangements.

Is a DMP or DRO better?

Debt relief orders can be used to deal with debts if you owe £30,000 or less and don’t have much in the way of assets – such as owning your own home.

The advantage of a DRO compared to a DMP is that they are legally binding whereas DMPs are informal. This means that creditors can not act against you whilst your DRO is ongoing. DMPs str informal agreements, meaning neither you nor your creditors are obliged to stick with it – offering less protection compared to the legally binding DRO.

Interest and charges are also frozen with a DRO, whereas this isn’t guaranteed with DMPs, so this is another advantage.

Is a DMP better than an IVA?

Much like debt relief orders, individual voluntary arrangements are legally binding – whereas DMPs are not.  A DMP also requires you to pay debt in full, while an IVA will wipe out any outstanding debts after the agreement is finished.

Although DRO and IVA may offer more legal protection – debt management plans will allow you to clear debt at an affordable rate (if you have enough money to spare in order to repay your debt) and help you avoid the consequences of some other debt solutions.

More Debt Management Services from Irwin Insolvency

As well as offering advice on debt management plans, our insolvency practitioners can also provide guidance on other debt solutions – including:

Debt Advice

Debt Relief Orders

HMRC Debt Management