Is my credit rating affected by setting up a Debt Management Plan?

If you currently have issues with debt problems, your credit rating has probably already been affected, so setting up the plan will not change this. If you are unable to meet the original terms of your credit agreement(s) your lenders will register a notice of default on your credit record. This will normally remain on your credit file for 6 years.

Does a DMP mean that I will lose my home?

If you've got a mortgage, the monthly repayment is taken into consideration when working out how much you can pay your unsecured creditors.

This should leave you with sufficient to carry on making your monthly mortgage payments. As long as you do this, your home should not be at risk.

What information will I have to provide when applying for a DMP?

It is important that the debt agency has a complete picture of your financial situation and will need to review details of the following:

• Details of all of your creditors, including account numbers and up to date balances
• Latest bank statements, credit card statements and any other finance agreements
• A full breakdown of your income and expenditure
• Details of any credit defaults or county court judgements
• Details of your Mortgage and any loans secured on your property
• Any Hire Purchase Agreements
• Details of benefits received, including Maintenance and Child Support Agency payments

How much will I have to repay each month?

This will depend on how much disposable income you have available (i.e. the money left over after paying all your living expenses). It will also take into account the amount you owe each individual creditor. So until the agency has been through your income and expenditure details they will unable to work out how much you can afford to pay.

To give you an idea how it would work, suppose you owe a total of £10,000

Creditor no1 - Personal loan £6000
Creditor no2 - Credit Card £3000
Creditor no3 - Bank overdraft £1,000

If it works out that your disposable income amounts to £200 per month, it would split and paid to your creditors on a pro-rata basis as follows:

Creditor no1 - Personal loan £120
Creditor no2 - Credit Card £60
Creditor no3 - Bank overdraft £20

How do I make payments to my DMP?

This will be agreed between you and the Debt Agency, but arrangements are flexible and will usually allow you to make your payments either weekly or monthly. You can make your payments by cheque, cash or standing order.

What if my payments under the DMP don't cover the interest payable?

You will find that the majority of creditors will agree to freeze interest charges when dealing with debt agencies who are trying to help consumers with their finances.

They are willing to do this on the basis that you are making a genuine effort to repay your borrowing.

How long does the DMP last for?

That will depend on how much you owe and the amount that you are able to pay back on a weekly or monthly basis.

You'll be given an idea of how long it will take when the plan is agreed, but if your situation changes and you are able to increase your repayments then your debts will be repaid sooner.