Do It Yourself Debt Management Plan – Complete Guide

Starting your own Debt Management Plan (DMP) is a smart way to manage your debts. You’ve come to the right place to learn how, as each month, over 170,000 people visit our website looking for guidance on debt solutions.

This article will guide you on:

•  Understanding how a DMP works
•  Steps to set up a DMP on your own
•  Weighing up the pros and cons of a DMP 
•  Comparing DMP with other options like an IVA
•  Knowing how a DMP could affect your job.

We know that managing debt can feel overwhelming — you might be concerned about how to start a DMP on your own.

But don’t worry, we’re here to help. Some of our team have dealt with their own debts, so we understand what you’re going through. We’ll help you take control of your debts with a DIY DMP.

How do I Set Up a Debt Management Plan on My Own? 

Since a DMP provider isn’t in the picture when you’re setting up a DMP on your own, the process becomes a lot shorter and quicker. 

Step 1: Determining if a DMP is Right for You

The first thing you need to make sure of is whether or not a DMP is even the right debt solution for you or not. 

You can choose to get debt advice regarding this from an independent charity but if you’d like to make your own judgment, then there’s a lot of information available online that can help you do so. 

If you’re looking for debt advice about whether a DMP is right for you or not, then you can go ahead and contact charities such as National Debtline or Payplan. 

» TAKE ACTION NOW: Fill out the short debt form

Step 2: Coming up with a Payment Offer 

Once you’ve determined that a DMP is definitely the right choice for your financial situation, then you have to start planning your payment offer. 

Your payment offer is a document which details what your DMP is going to look like based on your income and essential expenditures. 

You present this to your creditors and they will assess whether or not entering into a debt management plan with you would be a good option or not. 

In order to develop a payment offer that is affordable to you and also acceptable to your creditors, it’s important for you to document your finances well. 

Give complete details about what your monthly income is and what the source of it is. Attach as much documentation as you can to support it. This could be in the form of copies of bank statements and/or wage slips. 

Next, you need to detail what your essential monthly expenditures are. Again, attaching documentation with it can really help your case. This could also be in the form of copies of bank statements. Please note that priority debts cannot be included within a DMP and you have to make payments separately to them. Any payments you make towards priority debts are counted as essential expenditures within your DMP.

Once you’ve figured out your monthly income and your essential monthly expenditures, you can calculate your surplus income that would form the basis for your monthly payments towards your DMP. 

Please note that in addition to calculating what your monthly payment is going to look like, you’re also going to have to calculate how much of that payment is going to go to each creditor. 

The money from your one monthly payment will be distributed among your creditors on a pro-rata basis. 

This means that a creditor will get the same percentage of your monthly payments as the proportion of debt you owe to them out of your total debt. 

For example, if 50% of your total unsecured debts belong to a single creditor, then that creditor will get 50% of your monthly payments.

In most cases with a DMP, creditors agree to freeze interest and charges. However, if your creditors don’t freeze interest, then the amount you owe is going to be changing depending on the interest rate. So, you’ll constantly have to do these calculations over and over again every month to ensure each creditor is treated fairly. 

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Step 3: Call a Meeting with Your Creditors 

Once you’ve successfully made your payment offer, you’ll need to call a meeting with all of your creditors and present them with it. 

If all goes well, then your creditor(s) will immediately accept the offer and you can start making payments towards your DMP. 

However, if your creditors reject the DMP, you can ask them why that is. There’s a chance they might give you a reason and/or they might even suggest changes to the terms of your DMP which could cause them to accept it. 

If you can comply with the changes that they suggest, you could get your DMP accepted. 

That being said, it’s important to note that your creditors are not obligated to tell you why they rejected your DMP. They could just reject it outright without giving you a reason. 

In that case, you’d have to look towards other debt solutions to take care of your debt.