Debt Law

Debt Management Plans UK 2025 — What They Are and How to Get One Free

26 May 2025 ⏱ 10 min read 🇬🇧 England & Wales Last reviewed: May 2025

A Debt Management Plan (DMP) is a straightforward, informal arrangement to repay your unsecured debts at a monthly amount you can genuinely afford — based on your income and essential expenditure. Unlike bankruptcy or an IVA, no debt is written off, but interest and charges can be frozen, creditor harassment typically stops, and you have a clear structured path to becoming debt-free. Critically, you can get a DMP completely free through a charity or non-profit debt adviser.

What Is a Debt Management Plan?

A Debt Management Plan is an informal agreement between you and your unsecured creditors, managed by a third-party debt management company or charity, where you make a single monthly payment which is then distributed proportionally among your creditors. The monthly payment is based on your disposable income — your income after essential living expenses — not on the minimum payments your creditors demand.

Because a DMP is informal (not a legal insolvency process like bankruptcy or an IVA), creditors are not legally obliged to accept it. Most will, particularly when approached through a reputable debt management provider, but some may refuse. Creditors also retain the right to continue charging interest and to take enforcement action, though in practice most agree to freeze interest once a DMP is in place.

A DMP is most suitable for people who:

Have unsecured debts (credit cards, personal loans, overdrafts, store cards)
Have a regular income sufficient to make meaningful payments to creditors
Cannot afford the minimum payments demanded but can afford something each month
Want to repay their debts in full over time without formal insolvency
Are concerned about the impact of bankruptcy or an IVA on their employment or home

Calculate how long it would take to repay your debts through a DMP with our Debt Management Plan Calculator.

Free DMPs vs Fee-Charging DMPs — An Important Distinction

This is the single most important thing to understand about DMPs: you can get a DMP completely free of charge. Free DMP services are provided by charities and non-profit organisations including StepChange Debt Charity, National Debtline, Citizens Advice, and the Money Advice Service.

Fee-charging DMP companies are commercial businesses that typically take a percentage of your monthly payment (often 15–17%) as their fee, meaning your creditors receive less of your money each month and your debts take longer to clear. A commercial DMP on £300 per month might take £45–£51 in fees, with only £249–£255 going to creditors. Over a 5-year DMP, that could be £2,700–£3,060 paid in fees that could otherwise have cleared debt.

Always use a free DMP provider first. There is no quality advantage to using a fee-charging provider — the free services from StepChange (0800 138 1111) and National Debtline (0808 808 4000) are comprehensive, well-resourced, and operate to FCA standards. Commercial DMP providers are required by FCA to tell you that free services exist — if they don't, they are breaking the rules.

How a DMP Works — The Process

Step 1: Income and Expenditure Assessment

Your DMP provider will carry out a detailed income and expenditure assessment — listing all your income sources and all your essential monthly outgoings (rent or mortgage, food, utilities, transport, insurance). The difference between income and essential expenditure is your "disposable income" — this is the amount available to pay creditors each month.

Allowable expenditure categories are set by the Standard Financial Statement (SFS), a common framework used across the debt advice sector. The SFS includes specific guidelines for food, household bills, transport, childcare, and other categories. Your provider will work with these benchmarks to establish a realistic monthly payment.

Step 2: Contacting Creditors

Your DMP provider contacts all your included creditors on your behalf, advising them of your financial situation and proposing the DMP. Most creditors — particularly the major banks and credit card companies — will accept a DMP proposal from a recognised debt management provider. The provider asks creditors to:

Accept reduced monthly payments
Freeze interest and charges for the duration of the plan
Stop adding default charges or late payment fees
Cease any collection or enforcement activity while the DMP continues

Step 3: Making Payments

You make a single monthly payment to the DMP provider, which distributes it among your creditors on a pro-rata basis (proportional to the size of each debt). You no longer deal directly with each creditor individually — all contact goes through your DMP provider.

Step 4: Ongoing Review

Your DMP is reviewed regularly (usually annually) to reflect any changes in your income or expenditure. If your financial situation improves, your monthly payment may increase, shortening the repayment term. If things worsen, the payment can be reduced. The flexibility of a DMP compared to formal insolvency is one of its key advantages.

Interest Freezing — Not Guaranteed but Common

One of the biggest benefits of a DMP is that many creditors agree to freeze interest and charges during the plan. If they do not freeze interest, your debts may barely reduce despite regular payments, making the DMP much less effective. Most major lenders freeze interest as a matter of policy when a recognised DMP provider is involved, particularly if you are in genuine financial hardship.

If a creditor refuses to freeze interest, your DMP provider can try to negotiate. If they still refuse, you should factor ongoing interest accumulation into your assessment of whether a DMP is the right solution — in some cases, formal insolvency (bankruptcy, IVA, or DRO) may be more appropriate if interest is not being frozen.

Impact on Your Credit File

Entering a DMP will negatively affect your credit score. Creditors will typically mark your account as having "arrangement to pay" or may issue a default notice once you miss minimum payments (which is almost inevitable in a DMP). Defaults remain on your credit file for six years. During the DMP, you will find it difficult or impossible to obtain new credit at reasonable rates.

However, a DMP's impact on your credit file is less severe than formal insolvency — there is no public insolvency register entry, no bankruptcy restrictions, and lenders can see that you took proactive steps to manage your debts. Some people find their credit situation improves gradually during a DMP as older defaults age and fall off the file.

Priority Debts vs Non-Priority Debts

A crucial rule in DMP management: priority debts must always be dealt with first and should not be included in a DMP. Priority debts include mortgage or rent arrears, council tax arrears, utility arrears, TV licence arrears, child maintenance, court fines, and HMRC debts. These can have serious consequences if unpaid — eviction, disconnection, prosecution, bailiffs — and must take precedence over unsecured creditors in your budget.

Your DMP provider will ensure that your budget allocates enough for priority debts and essential living costs before calculating your DMP payment. Never include priority debts in a DMP or let a commercial provider suggest doing so.

When a DMP Is NOT the Right Choice

A DMP is not suitable for everyone. Consider an alternative if:

Your total debt is so large relative to your disposable income that you would need 10+ years to repay it — in this case, an IVA or bankruptcy may be more appropriate
Your income is so low that you have virtually no disposable income — a DRO or bankruptcy may be better
You have significant assets you need to protect and formal insolvency would threaten them — seek specialist advice
Creditors refuse to freeze interest and the debt is growing despite payments

Step-by-Step: Setting Up a DMP

List all your debts — every creditor, current balance, monthly minimum payment, and interest rate. Separate priority debts from non-priority unsecured debts.
Complete an income and expenditure statement — be honest and thorough. Include all income and all essential outgoings. Your disposable income is what is available for creditors.
Contact a free DMP provider — call StepChange (0800 138 1111) or National Debtline (0808 808 4000), or use StepChange's online DMP tool. They will assess your situation and advise whether a DMP is right for you.
Stop paying creditors directly — once your DMP is agreed, make your single monthly payment to the DMP provider only. Do not make separate payments to creditors — this undermines the DMP.
Open a new basic bank account — if any of your debts are with your current bank, they may offset your account. Open a basic bank account with a different provider for your income to be paid into.
Communicate changes promptly — if your income drops or expenses rise significantly, tell your DMP provider immediately. Adjustments can be made to keep the plan viable.

Frequently Asked Questions

Will a DMP stop bailiffs or legal action?+

A DMP does not have legal force — creditors are not legally prevented from taking enforcement action. However, in practice, creditors who have agreed to a DMP will not usually take legal action while you are maintaining payments. If a creditor is threatening court action or bailiffs before or during a DMP, contact your DMP provider immediately. In some cases, a Debt Respite Scheme (Breathing Space) application may be needed to provide a legal moratorium while the DMP is established.

Can I include all my debts in a DMP?+

Only unsecured debts can be included in a DMP — credit cards, personal loans, overdrafts, store cards, and similar. Secured debts (mortgage, secured loans) must be maintained separately. Priority debts (council tax, rent, utilities, court fines) must also be managed outside the DMP and paid first from your budget. Student loans are not included as they are repaid through PAYE and are not suitable for DMP treatment.

What happens if I come into money during a DMP?+

Unlike bankruptcy or an IVA, you are not legally required to hand over windfall income during a DMP. However, your DMP is reviewed regularly and a significant increase in income would typically result in an increased monthly payment. If you receive a lump sum, using it to make full and final settlement offers to creditors (often accepted at a discount) can be a highly effective way to end the DMP early.

How long does a DMP last?+

The duration depends entirely on the total debt divided by the monthly DMP payment. A £15,000 debt paid at £250 per month with frozen interest would take five years. If interest is not frozen, the repayment period extends — sometimes significantly. There is no maximum legal duration for a DMP. If the projected repayment period exceeds seven to ten years, your debt adviser may suggest that formal insolvency is a more practical solution.