If you have a lot of debt and it feels like it's out of control or headed that way, you may want to consider enrolling in a debt management plan (DMP). Set up by debt management professionals, a debt management plan can help you get on a reasonable bill paying schedule. A debt management plan is basically a payment schedule wherein you pay a debt management/credit counseling agency to negotiate terms of repayment with certain of your creditors (credit card companies, etc.). Sometimes, the agency can get fees waived or payments reduced for you. Each month, you deposit money with the agency and they pay your creditors. Debt management plans can help people who are drowning in monthly debt, but they aren't free, and unscrupulous companies surface all the time, taking advantage of people in financial crises. It is important to learn about debt management plans before signing on to one. Here are some ways to do so.
- Consult a qualified free credit counselor. A credit counseling agency - at least a reputable one - can be different than a debt management agency in that it is not concerned with helping you pay your bills as much as it is concerned with helping you learn more about obtaining financial stability. An agency providing free credit counseling will be able to provide you with background information on what DMPs do and what they don't do, and will help you decide whether a debt management plan is necessary in your case. (Just because you seek help with your debt doesn't mean you need a debt management plan.)
Credit counselors can be found through civic groups, colleagues, family or friends, or even online, and clients should check any agency they're considering with consumer groups like the Better Business Bureau.
- Consult the government. The federal government has been cracking down on debtors the last few years, as you may have heard if you tried to file for bankruptcy. But on the flip side, they are also cracking down on people who try to make money through fraudulent (or borderline fraudulent) debt management practices. The Federal Trade Commission has set up a website with important "dos and don'ts" for people using debt management plans.
Your state's attorney general's office may also have consumer information for people considering debt management plans and may also offer specific advice for applying for a plan in your state.
- Consult consumer watchdogs. If you're looking for basic information about what to look for in a debt management plan, check with people who are trying to crack down on the disreputable agencies. The Consumer Federation, for example, is "an advocacy, research, education, and service organization" that provides the public with information on all sorts of consumer issues (including debt management plans) on its webpage.
If you're considering a specific debt management plan, you can check the agency involved with organizations such as the Better Business Bureau or the National Federation for Credit Counseling (NFCC). The NFCC allows you, in fact, to check for agencies their organization has accredited in your area.
- Consult a debt management agency itself. If you have done some preliminary research into what a good debt management plan should and shouldn't offer, you may be ready to sit down with an actual debt management agency, and ask them about the specific ways they can help you. All debt management plans are not alike, and each person's situation should be handled in a way that is specially geared to help that person. Ask a debt management agent to walk you through the services they offer. And then, if you're satisfied, begin working with that agency on your plan
Debt management plans sometimes make people's lives easier. Having a set schedule of manageable payments can make the difference for a lot of people when it comes to eventually getting out debt. It's not a quick or easy solution, but it can aid some people in getting back on their feet. Other people may not need a debt management plan and enrolling in a plan could cost them unnecessarily in fees and time and paperwork. So, before you enroll in a debt management plan, check with the impartial experts, check out any specific agency before you sign up with them, and make an informed choice.