Debt Management Plan & Programs
A Debt Management Plan (DMP) is a strategic effort to eliminate debt.
A program will educate you on how to successfully manage your debt.
What Is a Debt Management Plan? How Can It Help?
A Debt Management Plan is NOT a loan. In a typical program, debt management companies work with creditors on your behalf to reduce your monthly payment and interest rates on your debt and waive or reduce any penalties. The parties agree on an affordable payment schedule that allows 3-to-5 years to pay off your debt.
A Debt Management Plan is part of the package of debt consolidation plans that are designed to help people regain control of their finances while reducing secure debts and unsecured debts. An unsecured debt is one that is not backed by collateral, and includes credit cards, medical bills and student loans.
It is one of several ways you can take control of your debt and reduces the number of payments you make each month and can save you money in interest and fees.
Those who enroll make monthly deposits with a credit counseling organization, which then is used to pay the debts according to a predetermined payment schedule developed by the counselor and creditors. Your monthly payment is tailored to what the customer can afford, and you know before agreeing to take part in the program what that monthly amount is. An analysis of household income vs. expenditures determines the monthly payment.
Advantages of a Debt Management Plan
- Offers credit card consolidation without a loan
- It will help you stay more organized and punctual with your bills and payments.
- It creates a realistic monthly budget with a financial goal.
- Making regular and timely payments can improve your credit report and credit score over time.
- Creditors or collectors have incentive to stop calling.
Considering a Debt Management Plan
Before you sign up for a debt management plan, choose a credit counseling organization like us to help you with the process. Many of these organizations are law firm, nonprofit and may offer counseling sessions free of charge, while others charge fees.
Some points to remember when enrolling in a DMP:
Signing up for a Debt Management Plan
If you decide a debt management plan is right for you, our credit counselor can help you enroll. He or she will work with your creditors to negotiate interest rates and to come up with a payment schedule, which you will review and approve before beginning the plan.
Once it is determined how much money is left after basic living costs like rent, mortgage, utility bills, secured loans and living expenses are paid, the remaining amount can be divided among creditors.
Then, you’ll make a deposit monthly to your credit counselor. In turn, the organization will distribute the money to your creditors according to the agreed-upon payment schedule.
Participating in a debt management plan will cost you very little. After counseling sessions, you should only pay a small one-time set-up fee and a small monthly maintenance fee. Avoid any credit counseling organization that requires an application fee, membership fee, or per-creditor fee.
After you enroll in a plan, follow these guidelines to help ensure that the program is working for you:
- Make note of which of your debts and bills will be paid via the DMP and which ones you still must pay on your own each month.
- Pay the counseling agency on time each month.
- Review your monthly statements to ensure that the counseling agency is paying your bills on time and according to plan.
- A debt management plan typically takes care of only unsecured debts and secured debts depend on its location.
Step-by-Step Process for Debt Management
If you are interested in participating, it is best to contact us. Before calling us, make a list of your monthly income and expenses. Be as accurate as possible, using recent pay stubs and bank statements, along with a list of all bills paid and unpaid. Have all that information available when you call us.