Debt Management Plans allow you to negotiate with your creditors and come to an informal agreement that allows you to freeze interest and charges and eventually pay off all your unaffordable debts.
In Scotland, the Debt Arrangement Scheme is a way of managing your debts and does allow you to have a legally-binding arrangement with your creditors.
However, depending on your situation, there may be times where a debt management plan suits you better.
You can self-arrange a debt management plan yourself with your creditors. Some people choose to approach a fee-charging DMP provider to arrange this on their behalf. Likewise, some other people also allow a debt charity to organise the debt management plan for them, with varying levels of support.
You can use the debt management plan to pay off non-priority debts. These include:
✔️ Credit Cards
✔️ Payday Loans
✔️ Store Cards
✔️ Catalogue Debts
✔️ Personal Loans
✔️ Bank Overdrafts
✔️ Credit Unions
You can’t use your Debt Management Plan to pay off priority debts. Such as:
X Mortgage Or Rent Arrears
X Secured Loans
X Guarantor Loans
X Court Fines
X TV License
X Council Tax
X Utility Bills
X Child Support and Maintenance.
As the consequences of not paying some debts before others can be more serious, you need to split all your debts into priority and non-priority and also consider if you have any debt emergencies. A sudden debt emergency can be described as court or sheriff officer action. Or eviction for mortgage or rent arrears.
For this reason alone, it is always best to seek free, independent debt advice urgently. A debt adviser will be able to talk to the court, sheriff officer or creditor on your behalf.