What is a Debt Management Plan (DMP)? A Plain-English Guide
Published 20th of September 2016·Updated 15 April 2026
Reviewed by: Reviewed for accuracy April 2026
A debt management plan (DMP) is an informal agreement between you and your unsecured creditors to repay what you owe at a reduced monthly rate you can genuinely afford. It is not legally binding, which means creditors can technically withdraw from it, but in practice most cooperate because they want their money back. A DMP can be arranged free of charge through StepChange or the National Debtline.
Short Summary
A DMP covers unsecured debts only, such as credit cards, personal loans and overdrafts. Secured debts like your mortgage cannot be included.
You make a single monthly payment to the DMP provider, who distributes it to your creditors on your behalf.
Many creditors agree to freeze interest during a DMP, though they are not legally required to do so. StepChange reports a high rate of interest-freeze agreements with major lenders.
A DMP will appear on your credit file and will affect your credit score for six years. Weigh this against the benefit of bringing your debts under control.
Who is a DMP suitable for?
A DMP suits people who have a regular income, can afford some monthly payment towards their debts, but cannot keep up with the minimum payments across multiple creditors. You must have unsecured debts; a DMP cannot include your mortgage, a car finance agreement secured against the vehicle, or any other secured borrowing.
If your debts are so large that even reduced repayments will take many years, or if you have no surplus income at all, alternatives such as an IVA, a debt relief order, or bankruptcy may be more appropriate. A free debt adviser can assess which option fits your situation.
How does a DMP work in practice?
Your DMP provider calculates how much you can afford to pay towards your debts each month after essential living costs. They contact each creditor on your behalf, propose the reduced repayment, and ask them to freeze interest and charges. Most creditors who work regularly with DMP providers, including high-street banks such as Barclays, Lloyds and HSBC, will cooperate with a realistic proposal.
Once the plan is agreed, you make a single payment each month to your provider. The provider divides this among your creditors in proportion to what you owe each one. You continue making this payment until all debts are cleared.
How do you set up a DMP for free?
StepChange Debt Charity (0800 138 1111) and the National Debtline (0808 808 4000) both offer free DMP services. They do not charge setup fees or monthly handling fees. Citizens Advice can also refer you to a free provider. These charities are regulated by the FCA and are entirely free to use.
Some commercial DMP companies charge fees, which reduce the amount reaching your creditors and extend the time it takes to clear your debt. The FCA requires fee-charging firms to be authorised; always check the FCA register at fca.org.uk before sharing financial information with any commercial provider.
What is the difference between setting up a DMP yourself and using a provider?
| Approach | Pros | Cons |
|---|---|---|
| DIY (contact creditors yourself) | No fees; you retain full control | Time-consuming; creditors may be less cooperative without a recognised intermediary |
| Free DMP provider (StepChange etc.) | No fees; creditors often respond better to established providers; single payment | Less direct control; provider manages on your behalf |
| Commercial DMP company | May offer additional support services | Fees reduce creditor payments and extend the plan |
Most people benefit from using a free provider rather than going it alone. Creditors recognise StepChange by name and are more likely to freeze interest when approached by an established intermediary.
What happens to your credit score during a DMP?
A DMP will have a negative effect on your credit score. Payments below the agreed contractual minimum are recorded as partial payments or missed payments on your credit file. The DMP itself may also be noted. These marks remain for six years from the date each debt is settled or defaulted.
Experian, Equifax and TransUnion each hold records independently. After the six-year period, the records are removed and your score can recover. Many people begin rebuilding their credit score within one to two years of completing a DMP.
How long does a DMP last?
The duration depends on the total amount owed and the monthly payment you can afford. A DMP has no fixed term. If interest is frozen, the plan ends when all included debts are repaid. If some creditors continue charging interest, the plan will take longer. StepChange's debt advice service will estimate a realistic timeline when assessing your case.
FAQ
Is a DMP the same as an IVA?
No. A DMP is informal and not legally binding. An IVA is a formal insolvency arrangement, requiring a licensed insolvency practitioner and creditor approval. An IVA can write off remaining debt at the end; a DMP requires you to repay everything owed. An IVA also has more significant consequences for your credit file and career than a DMP.
Can creditors still contact me during a DMP?
Yes, because a DMP is not legally binding. Creditors can still contact you, though most established creditors reduce contact once a DMP is in place. If a creditor continues to pursue you aggressively, your DMP provider can often intervene. Creditors also retain the right to take legal action if they reject the plan, though this is uncommon when repayments are being made.
What happens if I miss a payment on my DMP?
Contact your DMP provider immediately. Missing a payment can break the agreement with creditors, who may then resume interest charges or revert to pursuing the full contractual amount. Free DMP providers including StepChange will help you adjust the plan if your circumstances have changed.
Can I include council tax debt in a DMP?
Generally no. Council tax is a priority debt and should be paid before unsecured creditors. Priority debts also include mortgage or rent arrears, gas and electricity arrears, and court fines. Your DMP provider will always ensure these are budgeted for before calculating what can go into the plan.
Will my employer find out about my DMP?
No. A DMP is an informal arrangement and is not publicly advertised or listed on any register. Your employer has no reason to be notified. A DMP appears on your credit file but not on any publicly searchable register, unlike bankruptcy or an IVA.
Can I get new credit while on a DMP?
You can legally apply for new credit, but it is inadvisable and most lenders will decline. The DMP markers on your credit file, combined with a reduced credit score, make approval very unlikely. Many DMP agreements also ask you not to take on new credit while the plan is active, as a condition of creditor cooperation.