With so many debt solution options available to individuals, it can be tricky to
decide which is best. However, with proper advice from a debt advisor or Insolvency
Practitioner, the most appropriate option can be found. Depending on an individual’s
circumstances, it may be that some options are not suitable.
Debt Management Plans (DMPs), unlike other options, do not have strict eligibility
criteria, however, there are a number of things an individual can do to increase
the chances of the DMP being accepted by the creditors.
Anyone with £1,500 of debt, owed to 2 or more creditors would be eligible for a
DMP. As with many debt solutions available, only unsecured debt may be included
in a DMP. This could be an overdraft, credit or store card, payday loans and so
on. Secured debt, such as a mortgage may not be included in a DMP.
A DMP is an informal arrangement between the debtor and their creditors. As such, the
debt outstanding is required to be repaid in full. Therefore, for the creditors to
agree to the DMP, they will need to see that the individual has a regular source of
income in order to be able to keep up with the repayments. This does not necessarily
need to be employment, but it does need to be regular and consistent.
A debtor must be able to demonstrate that after all essential expenditure (food, utility
bills, rent or mortgage, transport and vehicle maintenance costs if required to work),
they have some money left over at the end of each month, and that this amount is lower
than the monthly amount owed to the creditors (i.e. the contractual payments). If the
amount remaining each month is very small, then an individual Voluntary Agreement (IVA)
may be a better option.
A licensed Insolvency Practitioner, money advisor or Debt Management Company will be able
to offer advice as to if a DMP is indeed the best course of action for an individual take. It
may not always be appropriate, and in those cases, an alternative solution may be better.