In a debt management plan, two parties are involved, the debtor and the creditor. A formal agreement is made between the two that will help to reduce the outstanding debts of the debtor within a fixed timeframe, thus helping him to recover and have control on his finances. The debt management plan or DMP is an individually-tailored plan that is drawn up based on the debtor’s affordability on a monthly basis. A detailed income and expenditure schedule is planned out. The remaining income amount is calculated, which is divided on a pro rata basis among the creditors to whom money is owed.
It is made with licensed debt management companies. When choosing these companies, utmost care and precaution must be taken. Customers should check the worthiness of the company with local consumer protection agency before going in for a deal. Certain debt management solution companies advise clients to stop paying their creditors, but clients must be careful that missed or late payments will tend to accrue interests and fines. They must be sure that the company starts paying the creditors immediately. A company that does not give detailed statements about how the payments are made or one that does not give a written agreement should not be chosen for this purpose. Some companies charge for their services and clients must study the costs of the plan beforehand. Usually, these charges include a set- up fee and also a handling fee at the time of each payment. In Australia, Debt Negotiators is one of the most reputed companies handling debt management solutions and plans.