About Debt Management Plans


The primary purpose of a debt management plan is to reduce your monthly debt costs.


Your creditors are asked to stop adding interest, to accept a reduced payment, and to deal with your debt adviser instead of you.


You make a single payment which is an amount you agree is affordable, then your DMP provider pays your creditors for you.


The provider also deals with your creditors for you, which could reduce your stress-levels and free up your time for more important things.


Debt management isn’t a formal insolvency process, so it isn’t recorded on a public register.


This debt solution is flexible. Your monthly payment can change if necessary and you’re free to cancel a debt management plan without extra cost or a long notice period.


Bright Oak is an authorised, established, and direct provider of debt management plan services. For expert debt management advice please contact us.


Qualification Criteria


Debt management is a flexible process so there isn’t a rigid list of qualifying criteria.


This debt solution may be suitable for you if:


1. You cannot afford your current debt repayments

2. You can afford to pay a reduced amount each month

3. You are committed to clearing your debts in the long-term

4. Other debt solutions will not produce a better outcome


There is no minimum or maximum debt level.


You can live in any part of the UK or have moved abroad with UK debts.


There’s no restriction against owning your own home or a vehicle. Debt management does not take your assets into account.


The DMP Process


Your debt adviser asks about your income, expenditure, debts, and assets, to form an understanding of your financial situation.


With your assistance, the adviser calculates how much to can truly afford to repay to your creditors. Priority is placed on covering your essential household bills and all other reasonable expenses.


You’ll be asked to provide some documentation and to sign the DMP paperwork.


If you owe money to your current bank you should open a new bank account and begin using it.


A debt management plan provider uses this information to issue repayment offers to your creditors.


The repayment offers demonstrate to your creditors that you’re experiencing financial difficulty and deserve their support. Because you’re in some financial difficulty, your creditors are asked to accept a reduced payment and stop adding interest to your accounts.


Creditors tend to be very supportive of people who have taken expert debt advice and who are repaying what they can reasonably afford. It’s uncommon for a creditor to resort to legal recovery action if they’re receiving an agreed regular repayment.


Benefits of Debt Management


• Your adviser deals with your creditors for you

• You make a single consolidated debt payment

• Your household bills and expenses are prioritised

• Creditors often stop adding interest and charges

• The payment amount is flexible if things change

• You’re free to cancel the plan without notice

• No entry on a public register

• Joint debt management plans are available

• Unlikely to cause employment problems

• Doesn’t take account of your assets


Drawbacks of Debt Management


• Your credit rating will be damaged

• No guarantee that interest and charges stop

• No formal legal protection from creditors

• Your general expenditure is restricted

• No debt write-off

• Plans may run for a long period of time


How Long is a DMP?


Debt management plans are not a fixed-term arrangement and will continue until your debts are repaid in full.


A DMP may be short if your debt total isn’t huge and you can afford a reasonable monthly payment.


Large debt totals might take a long time to repay.


Included Debt Types


The following types of debt are often included in debt management programs:


Credit cards

• Bank overdrafts

• Unsecured bank loans

High-cost loans

Credit union loans

• Guarantor loans

• Payday loans

• Store cards

• Catalogues

• Mortgage shortfall debts

• General bills

Bounce Back Loan


These debts will continue to be included if they’ve been passed to a debt collection agency.


Excluded Debt Types


The following types of debt are generally unsuitable for a debt management program:


• Debts secured on property (mortgages)

• Rent arrears

• Debts secured on vehicles

• Other HP agreements

• Student loans

• Court fines

• TV licence arrears/fines

• Child support or child maintenance debts

• Social fund loans

• Council tax arrears

• HMRC tax liabilities

• Tax credits or benefit overpayments

• Utility arrears at your current home


Will Interest and Charges Stop?


Lenders have a regulatory duty to treat customers in financial difficulty sympathetically and fairly.


The regulator (the FCA) identifies the suspension of interest and charges as being one suitable way to help a struggling customer. Without this suspension your debt level could continue to increase.


While debt management does not guarantee the suspension of interest, most consumer credit lenders will suspend it as part of a DMP agreement.


Will Creditors Accept A Reduced Payment?


The same regulatory obligations apply to this question. Consumer credit lenders are expected by their regulator to accept a fair level of repayment calculated on the basis of affordability.


Debt management does not guarantee creditor acceptance and their acceptances may not be immediate.


Joint Debt Management


You can enter this debt solution jointly with your spouse or partner.


Be aware that a joint debt management plan may not be the optimal way to deal with your household debts. It’s sometimes better for partners to each use a separate and different type of debt solution.


Switching Debt Management Providers


You’re allowed to switch to a new DMP provider and there should be no financial penalty involved in this change.


You can also cancel a DMP to begin using a different type of debt solution. A change of this type might be advisable if your financial position changes.


Your Credit Rating


A debt management plan will negatively affect your credit score.


The negative effect will be initially less severe than entering an insolvency process (like an IVA or bankruptcy) but in some scenarios that effect might last for longer.




Most types of employment are unaffected by entering a debt management plan. Insolvency (like an IVA or bankruptcy) affects more types of work.


Check your contract of employment (and any relevant professional regulatory standards) before beginning a DMP or any other type of debt solution.


We provide further detailed employment information if you:


• Are a police officer

• Work in the banking or financial services sector

• Serve in the armed forces

• Run a business; self-employed or as a company director

• Work in the legal sector


Debt Management Regulation


Debt management plan providers and debt advisers are authorised and regulated by the Financial Conduct Authority (FCA).


Customers of FCA authorised debt management firms have access to the Financial Ombudsman Service to resolve disputes.


Your DMP payments are protected by the Financial Services Compensation Scheme (FSCS) in the event that a provider goes out of business.




Bright Oak charges an agreed fee to operate our professional debt management plan service.


The agreed fees are collected from your monthly payment. The rest of your payment gets distributed amongst your creditors.


You can also access free debt management services via the Money Advice Service.


Self-Managing Your Debts


You don’t have to use a company or charity to manage your debts; some people decide to handle this work for themselves.


Creditors will want to understand your financial position including your income, expenses, assets, and other credit commitments.


This information might enable them to accept a reduced payment and offer you concessions on interest and other charges.


Public Register


There is no public register of informal debt management plans. This may be helpful for people in certain types of employment or for those with enhanced privacy needs.


This contrasts with the online registers of personal insolvency in England & Wales, in Northern Ireland, and in Scotland (where a register also records debt arrangement schemes and moratoriums).


A Potential Temporary Debt Solution


Some people select a debt management plan to help manage a short-term financial challenge. Examples include:


• Awaiting a salary increase

• In process of selling a home

• Awaiting receipt of a pension lump sum

• Likely to enter a different type of debt solution later

• Awaiting receipt of an inheritance

• IVA pending while proving gambling has stopped


A temporary debt solution might also help those financially affected by coronavirus who expect their situation to improve in the future. Examples could include:


• Employees on furlough

• Self-employed persons receiving grants

• Business owners with a temporarily reduced income

• Parents or carers unable to work their full contractual hours.

• Persons who are shielding

• Persons who are self-isolating

• Employees who have lost bonus, commission, or overtime

• Persons excluded from government support programs


You can cancel a DMP without notice or financial penalty. It’s possible to begin dealing directly with your creditors again once your financial position recovers.


Excluding a Debt


You cannot choose to exclude a debt from a bankruptcy, an IVA, or a debt relief order. If you live in Scotland this also applies to protected trust deeds and sequestration.


Some debts are “tricky” because putting them into a debt solution will create issues for your relatives, partner, or friends.


Joint loans and guarantor loans are two prime examples. Your debt solution will help you, but it will not shield your joint borrower or guarantor from their liabilities.


Money owed to your family or friends is another example. Most debt solutions do not allow any special treatment for this type of debt.


It’s possible that debt management could offer you more flexibility to deal with these difficult types of debt.


Without an absolute requirement to include all of your debts, your DMP adviser might assess it to be reasonable to exclude a particular debt from your plan.


This will only be useful and appropriate if:


1. Your adviser agrees that the exclusion is in your best interests

2. Your other creditors will support the exclusion of a debt


Alternative Debt Management Solutions


In England, Wales, and Northern Ireland


Debt Relief Order


If you qualify for a DRO you’ll probably find that it’s the cheapest and fastest way to get out of debt. The application fee is £90 and there’s no further payment to make.




An individual voluntary arrangement might be suitable if you don’t qualify for a debt relief order, a DMP will last too long, and bankruptcy will result in unacceptable consequences. Couples can enter interlocking IVAs together if appropriate.




Becoming bankrupt might be suitable if you don’t qualify for a debt relief order, debt management will last too long, and if bankruptcy doesn’t unacceptably affect considerations like your assets, employment, or business activities.


In Scotland


Debt Arrangement Scheme


This debt solution works similarly to an informal debt management plan in Scotland, but DAS provides you with extra legal protection and guarantees about the suspension of interest and charges.


Protected Trust Deed


A Scottish trust deed might be suitable if DAS or a debt management plan would last too long, or if your assets or employment would be unacceptably affected by bankruptcy.


Sequestration (Bankruptcy)


Scottish bankruptcy might be suitable if you cannot afford to pay anything towards your debts, if debt management would last too long, if you don’t have assets to protect, or if your employment will not be affected.


All UK


Debt Consolidation


This debt solution involves taking out a new loan that’s large enough to clear your other debts. Debt consolidation might be suitable if you’re able to reduce your overall payment and interest costs to an affordable amount.


Consolidating will not immediately harm your credit rating in the same way as other debt solutions. However, the consolidation of debt can also lead to extra costs and serious risks.


Getting Debt Management Advice


If you’re considering starting a debt management plan contact our expert advisers.


We’re a fully authorised direct provider of debt management plans and have been operating this debt solution since 2007.


You’ll be speaking confidentially with a qualified and friendly debt adviser.


We’re based in the Vale of Glamorgan (near Cardiff) and advise clients in all parts of the UK.



Author: Andrew Graveson

Qualified Debt Adviser & Bright Oak’s Founder


Page Last Updated: 22/06/2020



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