If you are in financial difficulty, not knowing how to meet your debt commitments, you would need the
advice of a credit counselor. You would need to find the various information regarding such an agency,
before you can select one for the services that you need. If you are deep into financial crisis, being
too much in debt, a credit counselor might advice you to enroll in a Debt Management Plan (DMP). A DMP
alone is not termed as credit counseling, and the plan is not for all. A certified credit counselor
should have spent a considerable time with you discussing and analyzing your problem, and only after that
you may consider signing on a DMP. Even with an appropriate DMP, a reputable credit counseling agency
should be helping you with the preparation of your budget and teaching you how to manage money.
DMP would require you to deposit money each month with the credit counseling agency, and the agency in
turn will pay your unsecured debts from the money that you deposit. These may be your credit card bills,
student loans, and medical bills, a schedule of which has been drawn up by your credit counselor. There
could be concessions made by your creditors in the form of lowering of interest rates, waiving off
certain fees, etc. You need to check these with your creditors making sure that they would offer you
concessions as have been mentioned by the credit counselor. To achieve a successful result through a DMP,
you would be required to make the timely monthly deposits, as mentioned, and this could take up to 48
months or longer to complete. To find out more about the completion of your DMP, you may ask your credit
counselor regarding the time that it would require for the plan to complete. During the time the DMP is
under operation, you may have to agree in not having or using any additional credit.
In order to determine whether DMP is right for you, you should consider the following:
You should ask your credit counselor if a DMP is the only option that could be provided to you. You
would want to find out if your credit counselor would be providing you with on-going budgeting advice,
whether you enroll in a DMP or not. A reputable credit counseling agency would provide you with such
services even if you opt for DMP. If your credit counseling agency does not offer you the service for
on-going budgeting advice, even after your enrollment in DMP, you better look for another agency which
would.
1. You need to find out the detailed operation of your DMP. You are needed to make sure that, on
signing the DMP, and depositing your money with your credit counselor, your debts are paid off in time,
as have been arranged with your creditors. You should sign on such a DMP that would allow payments to be
made to your creditors before the due dates or during the correct billing cycle.
2. You should not sign a DMP if you cannot afford the payment. Before signing the DMP, you would need
to find out as to how your payments would be determined. This would tell you if you can afford the DMP
drawn up for you.
3. You should know if you can have access to the status report of your account, and whether you could
get on to your account details online, or by phone. It is necessary that you get all updated account
information regularly from the credit counseling agency before you sign any DMP.
4. You would need to know if your credit counseling agency would get your creditors to lower their
interest rates or waive any fees that have been charged to your accounts. If the agency says yes, you
would need to confirm this out from your creditors, and also find out the time you are required to be on
the plan before you start to get the benefits.
5. It is important to find out which bills are included in the DMP as otherwise the bills left out
would have to be paid by you.
6. There are some credit counseling firms who would need you to make payments before they accept your
DMP. You will need to confirm this with your credit counselor organisation. If this is what your
counselor firm requires from you, call up your creditors to verify this information before you pay
anything to your credit counseling firm.
7. Beware, some of the credit counseling firms would tell you that, by enrolling into a DMP, the
negative aspects in your credit history can be removed. This can never be done. The negative report in
your credit history usually stays up to 7 years.
Debt management plan is for someone who has a financial crisis in hand, with several debt problems
which have become very difficult to be met with. DMP is not something which may be entered into by
everyone. More-over, you would need to have a reputed credit counselor in order to solve your financial
problems, since DMP is not a part of credit counseling. Even if you sign a DMP, your credit counselor is
under the obligation to provide you with the other services, such as, preparing a budget for you and
provide you advices on how to manage your finance.
