How does a DMP work?
If you’re thinking about starting a debt management plan, you may have some questions about how DMPs work.
The first thing you need to do is work out a realistic budget you’re able to live on. This should include all your living costs, and payments to your household costs such as rent or mortgage payments, utility bills and food shopping. But it shouldn’t include the payments you’re making to your debts.
Your budget will show you how much money you've actually got available to pay your unsecured debts after all your essential costs are paid.
Once you’ve got an accurate, sustainable budget, your DMP provider will be able to arrange a monthly payment to your creditors using the amount you have left over after your living expenses and priority bills have been covered.
Sometimes people make their own reduced payment arrangements directly with the creditors. When you’re on a DMP, the third party provider does this for you. In our experience, creditors are more likely to accept a reduced payment if it’s made through a debt management plan or a token payment plan (TPP) with a reputable provider.