Free debt-management plan

How it works

You need to have at least £5 a month to pay each of your non-priority debts after you have paid your essential outgoings and any priority debts. You usually have to be able to repay your debts in less than 10 years.
 
You make the agreed monthly payment to a debt-management company which distributes the payments among your creditors for you. 
 
Make sure you use a debt-management company that does not charge you any fees for their services. Contact us for advice.

Advantages

Disadvantages

  • ​This is a fair and transparent method of distributing payments.
  • The debt-management company will help you work out how much you can afford to pay using the Money Advice Trust's Common Financial Statement.
  • The debt-management company will negotiate with creditors on your behalf.  This means that offers are more likely to be accepted and interest frozen.
  • You can increase your payments if your circumstances improve.
  • You may be able to reduce your payments if your circumstances get worse.
  • The debt-management company administers all payments to your creditors.  You just make one monthly payment to the debt-management company. They should pass your payments on within five working days.
  • The debt-management company should review your plan with you every year and give your creditors regular updates.
  • You will have to pay your debts back in full. This could take a long time.
  • The debt-management company cannot force creditors to accept offers, or freeze interest, so a DMP cannot guarantee that all creditors will take part.
  • Creditors may still take court action against you.
  • This will affect your credit rating.
  • It is very important to make sure you use a free debt-management company.  It is not always easy to tell if the service is free when you look at their website. Contact us for advice.