A Debt Management Plan (DMP) is an informal agreement between a debtor and their creditors, so it does not require an Insolvency Practitioner to administer it. It allows the debtor to repay their debt in manageable monthly instalments. If there are multiple creditors, these payments will be divided accordingly. The goal of a DMP is to meet all financial obligations with the intention of becoming debt-free by fully paying off the outstanding debt over time. Depending on the total amount of debt, a DMP can last anywhere from 5 to 10 years.
What happens if creditors reject a DMP
Since a DMP is informal, creditors are not legally required to accept it. If creditors refuse to agree to the plan, the alternative option would be an Individual Voluntary Arrangement (IVA), which is a formal and legally binding agreement. An IVA is typically more favourable from a creditor’s perspective because it is a legally enforceable framework for debt repayment. An IVA will require an Insolvency Practitioner to act as a Nominee prior to the proposals being considered and then as a Supervisor of the IVA once the proposals have been approved.
