DRO vs Debt Management Plan (DMP)

DRO and DMP: the main differences

The biggest difference is legal force. A DRO binds your creditors; a DMP depends on their goodwill.

Formal versus informal: why it matters

A DRO is a formal insolvency procedure. Once the Official Receiver approves it, every creditor listed must stop chasing you, interest is frozen and enforcement stops by law. In return you accept legal restrictions for 12 months and must report any change in your circumstances.

A DMP is an informal arrangement. A provider works out what you can afford and offers each creditor a share. Most creditors accept, and many freeze interest, but none has to. A creditor can refuse, keep adding interest or take court action at any time.

What gets written off

Under a DRO, every included qualifying debt is discharged after 12 months, as long as the order is not revoked. Credit cards, loans, overdrafts, catalogues, rent arrears and benefit overpayments can all be included. Our qualifying debts guide lists them.

Under a DMP, nothing is written off. The plan continues until every debt is repaid in full. Excluded debts such as court fines and child maintenance remain payable in either case.

Cost and how long each one lasts

A DRO is free. The £90 fee was abolished on 6 April 2024 and advice from an approved intermediary costs nothing. It lasts 12 months. The DRO costs page covers the indirect costs.

A DMP is free if a charity such as StepChange or PayPlan runs it. Commercial providers charge a set-up fee and a monthly fee from your payments, so less reaches your creditors. A DMP lasts until the debts are repaid. With £20,000 of debt and £50 a month spare, repayment would take more than 30 years even if every creditor froze interest.

How each affects your credit file

A DRO is recorded on your credit file for 6 years from approval, and included debts are usually marked as defaulted and then satisfied. You also appear on the Individual Insolvency Register until 3 months after it ends. Our credit score guide explains what that means for renting and borrowing.

A DMP has no single entry of its own, but creditors commonly record a default or an arrangement-to-pay marker. Each default stays for 6 years from its own date. So a DMP does not protect your credit file, and a long plan may keep the damage going for longer than a DRO would.

When a DMP makes more sense

A DMP is a reasonable choice when your surplus income is clearly above £75 a month and the debts could be repaid within a few years. That surplus fails the DRO test anyway, and it is what makes a plan work. A DMP also suits homeowners, who cannot get a DRO, and people whose difficulty is temporary, such as a gap between jobs.

Flexibility is the other advantage. You can increase, reduce or stop payments as your situation changes. There is no entry on the Insolvency Register, and you can move to a formal solution later if the plan does not work.

When a DRO makes more sense

A DRO makes more sense when you meet every test and have no realistic prospect of repaying. On a very small budget a DMP can run for decades while unfrozen interest eats most of each payment. Some people end up on "token payment" plans, paying a pound or two a month to each creditor, when a free 12-month DRO would end the matter. Fee-charging providers have an incentive to keep such plans running.

A DRO is also the safer choice when you need certainty. If a creditor is threatening court action or bailiffs, only a formal solution stops them by law.

Using a DMP while you prepare for a DRO

The two are not always alternatives. A short DMP or token-payment arrangement can keep creditors informed while a DRO application is prepared. The adviser needs a full list of creditors, proof of income, bank statements, vehicle details and a budget, which can take weeks to gather. Our DRO application checklist lists everything they will ask for.

Two cautions apply. Paying one creditor more than the others in the 2 years before a DRO can count as a preferential payment and lead to refusal or revocation. Spread token payments evenly and agree them with your adviser. And a stop-gap plan should stay a stop-gap: if the DRO application stalls, ask why rather than letting the DMP become permanent.

Breathing Space can serve the same purpose. An adviser can place you in the Debt Respite Scheme for 60 days, pausing enforcement and interest while the application is assembled.