Consumer Credit Counseling Program

DMP (Debt Managing Plan) is an arrangement between a borrower and a creditor when, due to pecuniary difficulty, normal contractually agreed payment cannot be made. Initially an US concept, the DMP was launched in the UK by the Consumer Credit Counselling Service (CCCS) in the early 1990s when the organisation was founded.

This was a sovereign settlement that addressed the consequences of uncollateralised credit at a time when the private credit markets were growing rapidly. The DMP provides a structure for repayment of all outstanding indebtedness, rather than write-off part of the amount, as is the case with individual voluntary agreements (IVAs).

The agreement covers a longer term than initially foreseen, with one monthly amount that the borrower may make according to his own circumstance. Payments are apportioned among the accounts payable on a prorated base. It is important that a well-managed schedule provides respite. Instead of putting himself under pressure to give the creditor their cash first, it makes sure that the borrower has enough cash to buy daily necessities.

DMPs are an informality whereby there is no need for bondholders to agree to the scheme - although the overwhelming majority do - and a few do not block interest or charges so that the burden remains on the burden. It is not a matter of a bankrupt who disagrees with the application of a debt recovery program, but of making it more difficult for the borrower to repay all his debt successfully.

At these extremes, the loan is still settled at the lower proportionate interest while we - the credit counselors - ask the non-participating lender to do so. Dependent on the individual's position and the level of indebtedness, a legal arrangement may be a better one. As an example, we remind our customers that a LMP is not profitable if the debts cannot be repaid within a suitable time frame.

Reaching a more formally based arrangement can be more constraining and damaging to their creditworthiness and is also contrary to our ethics to promote repayments whenever possible. However, it could see them that debts are free in less and less timeframe. Fighting to make ends meet, he finally turned to credit to cover his essential cost of life after he lost his jobs.

He had £30,000 in indebtedness when he got in touch with the Central Credit Committee in 2008. Following a consultation, he was advised to take a four-year DMP, which he has now completed more than half. During this period Martin became one of four lenders after paying some of his smaller bills in full.

"So when I quit my profession, I turned to the credit card to buy the essential. At some point I couldn't get more credit because I was too risky," he says. "Now I have most of my debtors and I will repay my debt in the next few years. This includes the preparation of a plan - in which revenues, expenses, and liabilities are listed - to show what cash is available after significant items, utility companies, and prioritized invoices have been settled.

They then talk to each vendor in turn and ask them to pay lower amounts per month from a profit. However, it can be a complicated process to establish a LMP on an ad hoc by ad hoc basis and it can be difficult to negotiate not least with the same creditors you pursue for cash.

Rather, we suggest that a third person create a scheme on your name, so that there is an arbitrator between you and your believers. To have this cushion means that during this busy phase, when your lender and collecting agency calls you again and again with receivables, you have someone else who acts in your best interest.

Benefits from using an agent are also derived from relations with a creditor. Its disadvantage is that many indebtedness managing businesses will be charging a fees for their work in addition to the debts owned. In order to conserve funds during the life of the scheme and settle debts earlier, it is therefore much better to speak with a charitable or nonprofit organization that sets up and operates free Compact Maps.

A DMP provides a clear frame for repaying your debt and if your lenders approve the scheme, they are unbelievably workable. However, if you cannot adhere to the DMP payment, other alternatives may need to be taken into consideration, to include official resolutions such as insolvency or an IVA. Therefore it is not always the case that a DMP is the ideal one.

The most important indication of whether you are in the right place is your finances. These materials are for general information purposes only and do not represent or imply endorsement, taxation, legal or any other kind of consultation. Let us always advise you independently and professionally for your individual situations.