Free Debt Charities or Fee-Charging Companies

A debt management plan is an agreement between you and the people you owe money to. You make one affordable monthly payment, and it is shared out among your debts¹. Some companies charge for running that plan. Others, including the debt charities, do not.

The difference is straightforward. A fee-charging firm typically takes between 10% and 15% of your monthly payment as a management fee². On a free plan, every penny you pay goes towards your debts³. All plans work in the same way, and there are no extra benefits or protection from choosing one with fees¹.

That does not make a paid plan a scam. It makes it a choice with a cost attached, and the cost is money that would otherwise have reduced what you owe. This page sets out what each route involves, who can use a plan, which debts it covers, and what it cannot do.

Free debt management plans: no set-up or monthly fees

StepChange provides free debt management plans and charges no set-up or maintenance fees⁸. Its plans are completely free, and every penny goes towards your debts⁹. PayPlan also runs free plans, free to set up and manage, and does not take a percentage of your payment¹⁰. National Debtline gives free advice and can set up a free plan, handling payments and negotiating with the people you owe¹¹.

The Debt Advice Foundation says it will only ever recommend free debt management plans where debt management is appropriate for your circumstances¹². National Debtline says it only recommends using companies that provide a free service¹³.

Free plans are not a stripped-back version of a paid one. The Debt Advice Foundation states plainly that all DMPs work in the same way, and that there are no extra benefits or protection by choosing a DMP with fees¹. What differs is where your money goes.

A free plan is not the only free option. If creditors reject an IVA proposal and your circumstances are expected to improve, the alternative considered can be a long-term non-fee-charging debt management plan¹⁴. DMPs can be provided free of charge¹⁵.

Where the money goes when a plan is free

On a free plan, your monthly payment is passed to your creditors in full. PayPlan states that 100% of the money you pay goes towards repaying your debts, and that payments are administered free of charge¹⁰. StepChange's plans carry no set-up charges or monthly fees, so all the money you pay goes towards paying off your debts⁴.

Payments should be passed on within five working days¹⁶. Your monthly payment itself is worked out from your budget: it is based on what is left after priority household bills, arrears and other living costs, and any leftover money goes to your monthly DMP payment¹⁷.

Some debts will be paid off before others. Those debts drop off the plan when they are paid in full, which frees up more of your payment to go to the remaining debts¹⁸. The length of the plan depends on how much you owe and how much you can afford each month, so high debt and low payments mean a longer plan¹⁷. Free plans usually require you to be able to repay your debts in less than 10 years¹⁶.

Who can use a debt management plan and which debts it covers

A DMP is a debt solution that helps people pay their debt at a rate they can afford¹⁹. It is a voluntary agreement between a debtor and some or all of their creditors to repay debts over an extended period²⁰. The plans are managed by companies known as debt management plan operators or providers, who negotiate with creditors and manage payments⁵.

Eligibility comes down to two things: a regular income, which includes wages, benefits or pension income, and money owed to multiple creditors⁶. There is no limit to how much debt or how many accounts you can include⁶.

The debts covered are unsecured ones. A DMP can only be used to pay unsecured debts, meaning money you owe that has not been guaranteed against your property⁵. In practice that means credit cards, overdrafts, personal loans, catalogues and water bills⁶. National Debtline describes the scope as non-priority debts only, such as credit cards, overdrafts and personal loans, with priority debts usually paid separately²¹. Shelter Cymru makes the same point: these plans are set up without involving the courts, but can only help with debts that are not secured on your home²².

Priority debts sit outside the plan. These include mortgages, car hire purchase, current utility bills, and secured loans or second charges⁶. Hire purchase agreements cannot be included because they are secured against the item being purchased, though a loan taken to buy a car can be⁶.

You can set up a DMP yourself, but you then have to manage your own payments, contact everyone you owe yourself, and manage the plan yourself²³.

What a debt management plan cannot do

A DMP is not a write-off. Your debts must be repaid in full and will not be written off⁵. If you finish the plan, your unsecured debts will be cleared⁵, but that is the whole of the debt plus whatever interest and charges creditors applied along the way.

It does not stop creditors taking action. A DMP does not protect you from further court action¹⁵, and creditors can still take court action against you²⁴. PayPlan puts it in the same terms: because a DMP is an informal arrangement, creditors may still take legal action, which it says is not common but is possible⁶.

It does not force an interest freeze. A DMP does not make your creditors stop interest and charges⁷. There is no legal requirement for creditors to suspend interest payments or charges if you take out one of these plans²². No debt management company, including PayPlan, can guarantee that creditors will freeze interest and charges during your DMP²⁵. Creditors will sometimes agree to freeze interest when a plan is being set up, and may stop other action such as taking you to court, but they do not have to agree to this or to the plan at all⁵.

It does not cover secured debts. Mortgages and other secured debts are not covered by a debt management plan⁵, and not all debts can be included in management solutions²⁶.

It affects your credit rating. You make lower payments to your debts, so your plan affects your credit rating¹⁵. Paying less than originally agreed can impact your credit file, and missed or reduced payments may already have affected it⁶.

Getting free debt advice: phone, online chat and WhatsApp

Advice comes before the plan. Get debt advice from a debt charity or debt management company before you choose a debt solution²³. Free and independent advice on debt management plans, or any kind of debt problem, is available from organisations such as Advice NI⁵. If you owe money to HMRC, you can get free, confidential and independent advice from a debt adviser²⁷.

Free debt advice is available online or over the phone²⁸. PayPlan offers support by phone, online chat or WhatsApp, and says an assessment with an adviser can be done over any of those channels²⁹. StepChange offers debt advice over the telephone or online. Shelter Scotland notes that there are free advice services that can help³⁰.

Before you speak to an adviser, basic details are enough: your income, your regular expenses and a list of your debts. Recent bank statements or letters from creditors can be helpful but are not essential at first²⁹. PayPlan says it is required to submit your income and expenditure details to your creditors¹⁰.

Once you are in a debt solution, creditors should stop contacting you directly. For some solutions, including DMPs, creditors may still reach out but should respect the terms of your plan if you are meeting your repayment offers²⁹. A managed solution such as a DMP is reviewed with you every year²⁹, and National Debtline says the debt management company should review your plan with you every year and give your creditors regular updates¹³.

Help if you are vulnerable or facing court action

A DMP offers no protection from court action, so if a creditor is pursuing you, the plan is not a shield. Creditors can take further action against you, such as court action³¹. If you are in that position, the free advice services cover it: StepChange offers free, flexible debt advice based on a comprehensive assessment of your situation, with practical help and support for however long it is needed³².

Scotland has a separate solution with stronger protection. The Debt Arrangement Scheme can protect you from creditors making you bankrupt, or using court action against you to enforce your debts³³. If you keep to the agreed payments, your creditors will not be able to make you bankrupt or use diligence against you, and that protection starts once you have made an application and are waiting for it to be approved³⁴. A DMP is not the same thing, and the difference matters if court action is a live risk.

Water companies are expected to have an approach that protects customers from fraud while allowing properly authorised people or organisations, such as free, independent debt advisers, access to help operate accounts³⁵. If you are in a vulnerable situation, that expectation is what allows an adviser to deal with a supplier on your behalf.

If a provider closes, this does not cancel your debts³⁶. Debt advice is not covered by the Financial Services Compensation Scheme, so payments held by a provider are not protected in the way a bank deposit is³⁷. If you have a complaint about a debt solution or a firm, the Financial Ombudsman Service handles complaints involving cost of living issues³².

Free, impartial help is available from MoneyHelper, from the debt charities named on this page, and from the Financial Ombudsman Service if a complaint needs escalating.

Fixed or free: what the fee actually buys

The choice is not between a good plan and a bad one. It is between paying for administration and not paying for it.

The practical effect of a fee is that your debts take longer to clear, because less money reaches them each month. The Debt Advice Foundation's position is that it will only ever recommend free plans where debt management is appropriate¹², and National Debtline only recommends companies providing a free service¹³.

Where a debt management company is involved in an IVA, it is likely to be more expensive because it charges a fee on top of the insolvency practitioner's fees, and getting an IVA without one is usually cheaper³⁸. That is a separate product, but the same principle applies: a fee is money that does not go to your creditors.

If a provider stops trading

A provider closing does not cancel your debts³⁶. What changes is who administers the plan and how your payments are handled.

If this happens, free and independent advice is the starting point. National Debtline and PayPlan both give free advice and can set up a free debt management plan, handling payments and negotiating with the people you owe money to¹¹. Moving to a free provider means the whole of your payment goes to your creditors from that point⁴.

Your creditors still have to be paid, and the underlying agreements do not change. A DMP is an informal arrangement, so there is no court process to unwind and nothing to remove from a public register⁶.

Where the rules differ across the UK

A DMP works the same way across the UK, but the alternatives around it do not.

In Scotland, the Debt Arrangement Scheme is a statutory route with protection from bankruptcy and diligence if you keep to the agreed payments³⁴. National Debtline publishes separate guidance on debt help and advice in Scotland³⁹, and Business Debtline has a Scottish version of its ways to clear your debt guide⁴⁰.

In Wales, Shelter Cymru covers debt solutions and alternatives to bankruptcy, with its pages last updated on 18 September 2026⁴¹. In Northern Ireland, nidirect sets out debt management plans and the wider debt repayment options available⁴².

The Insolvency Service publishes monthly individual insolvency statistics for England and Wales, which give the wider picture of how many people are using formal solutions⁴³. StepChange Debt Charity registered 54% of breathing spaces between the start of the scheme in May 2021 and 30 June 2026⁴³, and 56% of breathing spaces in England and Wales between May 2021 and 31 July 2026⁴⁴. Those figures show how heavily one charity carries the free advice load, not how any individual should proceed.