As of August 2025, with household borrowing rising and many people struggling with credit card and loan repayments, Debt Management Plans (DMPs) are one of the most popular tools for tackling debt in a structured way.
A DMP won’t suit every situation, but for many people with non-priority debts it offers a realistic, affordable path back to control.
What is a Debt Management Plan?
A Debt Management Plan is an informal (not legally binding) agreement between you and your creditors to repay debts over time at a level you can actually afford.
Most people arrange DMPs through a free debt charity like StepChange or PayPlan.
Creditors are not forced to accept, but in practice, many do, especially when a regulated organisation is negotiating on your behalf.
For example, if your contractual repayments are £120 a month but your budget only allows £50, a DMP adviser may agree with your creditors to accept the lower payment.
In many cases, interest and charges are frozen, so your debt stops growing and you get space to breathe.
What debts can you pay with a Debt Management Plan?
DMPs only cover non-priority debts, those that won’t immediately threaten your home, liberty, or essential services if unpaid.
You can usually include:
- Credit cards
- Overdrafts
- Store cards
- Catalogue accounts or buy now, pay later agreements
- Unsecured personal loans
- Payday loans
- Money borrowed from friends or family
- Water, broadband, or mobile phone arrears
You cannot include priority debts such as rent, mortgage, council tax, child maintenance, court fines, or energy arrears.
These must be dealt with separately, as failing to pay them can lead to eviction, repossession, or legal action.
Read our full guide to priority vs non-priority debts.
How do you set up a Debt Management Plan?
- Review regularly – If your circumstances change, payments can be adjusted.
- Contact a free provider – StepChange, PayPlan, and Christians Against Poverty all offer DMPs at no charge. Avoid fee-charging firms that take a cut of your payments.
- Create a budget – Be honest about your income and essential expenses. Advisers will help you calculate what you can realistically pay.
- Agree payments – The DMP provider contacts creditors and negotiates reduced payments, usually asking them to freeze interest.
- Make one monthly payment – You pay your DMP provider, who distributes the money fairly across creditors.
Pros and cons of a DMP
A Debt Management Plan will likely impact your credit score as it changes repayment arrangements.
Benefits:
- One affordable monthly payment.
- Interest and charges often frozen.
- Reduces creditor pressure.
- Flexible, can be adjusted as circumstances change.
- Set up free through charities.
Drawbacks:
- Some creditors may not freeze interest.
- Not legally binding—creditors can refuse or withdraw.
- Only covers non-priority debts.
- Usually takes longer to repay than original agreements.
- Impacts your credit file until debts are cleared.
Recent developments for 2025
- FCA oversight strengthened – New regulatory reporting (PS25/3) increases transparency and consumer protection in the debt advice sector.
- Universal Credit changes – Repayment deductions for benefit overpayments capped at 15% instead of 25%, freeing up income for essentials.
- Energy debt relief – Ofgem is trialling no-standing-charge tariffs and matched repayment schemes to ease pressure on households behind on energy bills.
These changes make DMPs even more valuable for people balancing multiple non-priority debts alongside cost-of-living pressures.
What are the consequences of a DMP?
- Your credit score will be affected, as creditors mark arrangements or defaults on your file.
- Missed payments will remain on your credit report for up to six years.
- A DMP itself doesn’t appear as a formal mark, but the reduced payments and defaults do.
- A DMP may make it harder to access credit in the short term—but it helps avoid more serious enforcement action.
Debt Management Plans and you
A Debt Management Plan isn’t for everyone. If most of your debts are priority debts (rent, mortgage, council tax), a DMP won’t be the answer.
In that case, you’ll need other solutions such as repayment arrangements, a Debt Relief Order (DRO), or an Individual Voluntary Arrangement (IVA).
The best next step is always to contact a free debt advice charity for tailored guidance.
DMP FAQs
1. Can I include priority debts in a DMP?
No. Priority debts like rent, council tax, child maintenance, and energy arrears must be dealt with separately. A DMP only covers unsecured, non-priority debts.
2. Are DMPs always free?
Yes, if you go through StepChange, PayPlan, or CAP. Fee-charging companies exist, but they reduce how much of your payment goes to creditors and slow down repayment.
3. How long will my DMP last?
It depends on your total debt and affordable payment. For example, £8,000 of debt at £120/month takes about 67 months. You can shorten this if your income increases or you make lump-sum payments.
4. Will a DMP ruin my credit score?
Your credit rating will be negatively affected, but so would continued defaults without a plan. A DMP at least shows you are addressing your debts responsibly.
5. What happens if my circumstances change during a DMP?
DMPs are flexible. You can increase payments if your income rises, or reduce them temporarily if money gets tight. Always inform your provider as soon as your situation changes.
