Missing a Payment or Can No Longer Afford a DMP

A debt management plan (DMP) is an informal agreement between you and the companies you owe money to, so missing a payment does not end it automatically¹. It is not legally binding, which cuts both ways: you are not tied into a fixed payment for a set period, but your creditors do not have to accept the reduced offer and are not legally stopped from taking further action².

If you miss one payment, contact your provider. StepChange does not cancel plans for one missed payment, especially when circumstances are outside your control, but other providers may cancel after multiple missed payments³. If you miss payments a lot, your plan is at risk of being cancelled⁴. The practical steps are to tell your provider what has changed, review your budget, and ask for the monthly amount to be lowered rather than simply stopping paying.

A DMP is informal, so a missed payment does not end it automatically

A DMP is an informal arrangement where you repay your non-priority debts through an affordable monthly payment². Because it is informal, you are not tied into making a fixed payment for a set period, and you can ask for a review if your situation changes². That flexibility is the main difference between a DMP and a formal solution such as an IVA or bankruptcy.

The trade-off is that your creditors keep their legal rights. National Debtline sets out the position plainly: a DMP is informal, which means your creditors do not have to accept the reduced offer of payment, and are not legally stopped from taking further action². For a DMP to be successful, it requires all creditors to agree⁸.

In practice, most creditors accept a DMP because it gets them more than a token payment would. But acceptance is voluntary and can be withdrawn. If you miss payments a lot, your DMP is at risk of being cancelled⁴. StepChange says it may have to close your DMP if it does not hear from you, and describes that as a last resort³.

What creditors can do if payments stop: interest, charges and legal action

Creditors may agree to freeze interest and charges during a DMP, but there is no guarantee⁵. They can add further interest and charges⁵. If you miss many debt payments, the people you owe could take court action⁹.

The picture is sharper in Scotland. If a debt payment programme (DPP) is not approved, or you stop paying, the people you owe can apply interest and charges and take court enforcement action again¹⁰. If a DPP fails, creditors can add interest and charges again, backdated to the start of the DPP when interest and charges were stopped¹¹. That backdating is the single biggest financial risk of letting a Scottish plan lapse.

On credit cards, extra charges are added if you miss payments¹². For Buy Now Pay Later, which the FCA regulates as Deferred Payment Credit, firms need to contact you if you miss a repayment to let you know and explain what this means, and lenders need to provide support if you are struggling to make repayments¹³.

Reviewing your budget and lowering the monthly payment

Monthly DMP payments are based on what you can afford towards your debts¹⁵. When your circumstances change, the payment should change with them. To change your payments, review your budget with your DMP provider and use any leftover money to increase your DMP payments¹⁶. If your income has dropped, get in touch and the provider will review your budget¹⁷.

If you have been made redundant, your provider may need to adjust your monthly DMP payments because your income is reduced¹⁸. The same applies to any drop in income, a new essential cost, or a change in household circumstances.

There is a limit to how far a payment can fall. Your monthly DMP payment could be less than the minimum amount you agreed¹⁹. If the reduced amount is so low that creditors will not accept it, the plan may stop being viable, and that is the point at which a formal solution is worth discussing.

Breathing space: pausing creditor action while you get advice

Breathing space is a scheme that can stop payment demands for a set amount of time while you get debt advice²⁰. It lasts 60 days, and stops most types of enforcement, and also stops most creditors applying interest and charges, for that period⁶.

The protections include pausing most enforcement action and contact from creditors, and freezing most interest, fees and penalties on their debts²¹. For rent or mortgage arrears, it can pause any enforcement action through the courts, debt collectors or bailiffs²². For people with mortgage arrears getting debt advice, it pauses the repossession process for up to 60 days²⁰.

Breathing space is not a solution in itself. It buys time to get advice and decide what to do, and it is available once in a 12-month period for a standard breathing space. If you are in a mental health crisis, a separate scheme with different rules applies.

When a DMP no longer works: IVA, bankruptcy or a DRO

Your DMP is not doing its job properly if your quality of life is suffering, or you are falling behind with bills²³. The three main signs of a failing DMP are that it is hard to make your DMP payments, you fall behind on priority debts, or you need to go without food or toiletries to make the payment³.

If any of those apply, the formal options are worth understanding. An individual voluntary arrangement (IVA) is a legally binding agreement with your creditors, usually lasting several years, and it can write off unpaid debt at the end. Bankruptcy is a court-based solution that can end your liability for most debts, with restrictions during the period it lasts. A debt relief order (DRO) is a cheaper, simpler option for people with low income, few assets and debts below a limit.

For a DRO you must be unable to pay your debts²⁴. You will not be eligible if you are already bankrupt, are in an IVA or an interim order has been made, are subject to a bankruptcy restrictions order or undertaking or a debt relief restrictions order or undertaking, or have a bankruptcy petition pending unless a court has referred you for a DRO²⁵.

Free help to change or restart your plan

You can set up a DMP through a debt charity like StepChange, which will set up and manage it for free, through a debt management company which may charge fees, or on your own²⁶. DMPs can be provided free of charge²⁷. StepChange's DMPs have no set-up charges or monthly fees²⁸, and its DMPs are free²⁹.

To update your plan, update it in OnlineDMP or contact the team; big changes made online may be followed up with a call¹⁷. If you have reduced your payments and want to increase them again, get in touch and the provider will review your budget¹⁷.

StepChange's free debt advice and support service is available online 24/7, and you can start, pause and pick it back up⁷. PayPlan's advice is private and completely free³⁰. Both charities also run phone lines during working hours.