My DMP fee is too high

A reader asked if it’s OK to lower your debt service payments when needed?

This is a common problem with Debt Management Plans (DMPs). Sometimes your income goes down. Usually your essential expenses increase faster than your income.

In debt management, you pay a set amount to the DMP company and they divide it among the creditors. So what happens if you can no longer afford that monthly payment?

There is good news – DMPs are not formal legal agreements and it is much easier to get them changed than when you are in an IVA.

Ask for any debts outside the DMP to be added

Maybe you’ve decided to leave debt like an overdraft or catalog out of the DMP, thinking it will be easier. But paying this and the interest makes your life very difficult.

Or maybe you’ve been struggling to manage for a while and now you have new debts piling up. Here it’s really the new bills that are the problem, not the DMP. Taking out new loans is often the solution.

In any of these cases, ask your DMP company to file new bills.

They usually won’t bother you to do this once, but you can’t keep up with new debts. You need the DMP payment to be set at a level that allows you to set aside money for emergencies, Xmas, car service, school uniform etc. So also ask for a review of your payment.

Ask for an update if you need one

A DMP firm will typically review your DMP annually to see if it needs to be updated. But if there’s a big change during the year, or a lot of small ones that add up, call and ask for an update.

Some problems may be temporary – perhaps you have an unexpected expense like a car repair. That could mean missing a few months’ worth of payments, then going back to normal.

But if there’s going to be a big drop in your income, like going on maternity leave, or a lot of your expenses have just gone up and your salary hasn’t caught up, you need your DMP payments reduced now, you can’t wait.

For many people, the cost of living problems in the past few years have been a nightmare. So tell your DMP company why you’re having problems and request an update now.

It is important to set your DMP fee at a level you can manage. If your income is highly variable, talk to your DMP firm about how this can be done.

Do you have a better option?

DMPS charging fee

If you use a debt management company that charges you monthly, consider switching to a free DMP provider like StepChange. Their DMPs work exactly the same as the current ones, except that all your money goes to the creditors.

Switch to StepChange and DMP will be finished soon!

(NB if you are self-employed, talk to Payplan, not Stepchange)

Get a DRO instead

The DRO rules were relaxed in 2024, so more people now have a DRO.

If you owe less than £50,000 and you don’t own a house, a Debt Relief Order (DRO) may work for you. You can now have a DRO if your car is worth up to £4,000

As a result many people on DMPs should consider switching to a DRO.

A good credit adviser like Stepchange can talk you through your options in a longer DMP

Ways to speed up your DMP

If the DMP started a few years ago, consider whether you can overcome any affordability appeals:

• did you have an overdraft not just for a few days at the end of the month but for most or all of the days?
• Has a credit card or catalog raised your limit too high while making only small payments?
• were the repayments on the loan so large that you ran out of money and had to borrow elsewhere?
• Has the car loan caused you serious problems with your other debts?

See my articles on affordability appeals which look at these situations in more detail. There are different headings for different types of debt, each with a template letter you can use to make a complaint.

Winning a solvency appeal may mean your balance is reduced, which will speed up your DMP. And, as a positive result, you may get your credit record faster.

If the DMP started long ago, many of your debts may have been sold to debt collectors. Read Ask your creditor to produce a Credit Agreement, because if the debt collector can’t produce a CCA agreement for a credit card, catalog, loan or HP, the debt will not be valid in court and you can tell the DMP company to remove it from your DMP.

Answering the question

So the answer to the reader’s question is Yes, you can reduce the amount you pay in a DMP, they are flexible. Talk to your DMP firm and explain why you need an update.

But lowering your payments means your DMP will last longer. If you’re sure your new payments will be sustainable and the DMP won’t take too long, that’s fine. But if you feel that the completion of your DMP is a distant goal, look for other ways and means to accelerate it.

More The debt camel Articles:

Making a claim on DMP – good idea!

Options when you can pay debts and debts