A Debt Management Plan is an informal arrangement negotiated with your creditors in order to reduce your monthly payments. It does not reduce the overall amount of debt, but by spreading your monthly payments over longer period of time, they can normally be reduced to a more affordable amount.

It is important to note the arrangement is not legally binding, so ultimately your creditors can still take you to court.

To enter into a Debt Management Plan you are required to live within a budget, and this is discussed openly with you up front. Your income and expenditure details are submitted to your creditors, and if they see you aren't overspending or buying luxury items, they are much more likely to freeze ongoing interest and charges. It’s in your interest therefore, to show your creditors you are prepared to make sacrifices in order to repay your debts.

Not normally – a Debt Management Plan is an informal alternative to bankruptcy and isn't legally binding, so you shouldn’t lose your home if you continue to make the agreed payments. Ensuring your property is not at risk should always be a priority, and allowances made within your income and expenditure to make certain that payments on any mortgages or loans secured against it are kept up. Providing this is done, there is no reason why your property should be at risk.

A Debt Management Plan can be a practical solution for people with relatively small levels of debt. The main advantages are:

¤	reduces your monthly payments to an affordable amount
¤	interest and charges can sometimes be frozen, so your debt doesn’t increase
¤	can avoid having to sell your home
¤	keeps your details out of the local newspapers.

By entering into a Debt Management Plan, your creditors can issue a Default Notice since you are defaulting on your original credit agreement. If you receive a Default Notice however, it doesn't automatically mean the creditor is going to take legal action, but the default will appear on your credit file for 6 years, making it difficult to borrow money in the future.

The length of your Debt Management Plan depends on your individual circumstances, such as your overall debt, your monthly income, and whether or not your creditors are prepared to freeze interest and charges.

For example, if you owe £14,500 and can afford to pay £150 per month, the plan would last for approximately 8 years, or 97 months. This would only apply however, if monthly payments were maintained, and your creditors agreed to freeze all interest and charges for the duration of the plan – if they don’t agree to this then you could end up paying for between 10 and 15 years.

It is also possible for your Debt Management Plan to be completed sooner, if your circumstances improve and your payments can be increased.

Depending on your personal circumstances there are several alternatives to Debt Management, the main options being an IVA, Debt Consolidation, a Remortgage, or even bankruptcy. Each of these have their various merits, but for more information or a comparison between them, take a look at all our debt solutions.

Unfortunately your creditors are still entitled to contact you directly, so there is no guarantee that all the phone calls and letters will stop immediately. However, they will be reduced, and once the plan is well established they should stop altogether.

Since a Debt Management Plan isn't legally binding, creditors can still take court action against you. They are under no obligation to comply with the terms of the plan, and are entitled to pursue the debt in full at any time. Providing you maintain your monthly payments however, this should be avoided.

Creditors aren't obliged to freeze interest and charges but they can be co-operative if they see you are genuinely making every effort to clear your outstanding debts. The creditors will look at your income and expenditure when deciding whether or not to freeze interest and charges.

It can be considered fraudulent if you take out credit when you know you can't repay it. The Debt Management Plan will make sure you have enough money to live on, so you shouldn't need to borrow any more. There are of course exceptions, such as a company credit card where you are not liable for the payments, but you should declare these to avoid any problems.