Debt Management Plans
Bankruptcy Alternatives: Debt Management Plans
If your financial problems stem from too much debt or your inability to repay your debts, a credit counseling agency may recommend that you enroll in a debt management plan. A DMP alone is not credit counseling, and DMPs are not for everyone. Consider signing on for one of these plans only after a certified credit counselor has spent time thoroughly reviewing your financial situation, and has offered you customized advice on managing your money. Even if a DMP is appropriate for you, a reputable credit counseling organization still will help you create a budget and teach you money management skills.
How a DMP Works
You deposit money each month with the credit counseling organization. The organization uses your deposits to pay your unsecured debts, like credit card bills, student loans, and medical bills, according to a payment schedule the counselor develops with you and your creditors. Your creditors may agree to lower your interest rates and waive certain fees, but check with all your creditors to be sure that they offer the concessions that a credit counseling organization describes to you. A successful DMP requires you to make regular, timely payments, and could take 48 months or longer to complete. Ask the credit counselor to estimate how long it will take for you to complete the plan. You also may have to agree not to apply for--or use--any additional credit while you're participating in the plan.
Is a DMP Right For You?
In addition to the questions already listed, here are some other important ones to ask if you're considering enrolling in a DMP.
Is a DMP the only option you can give me? Will you provide me with on-going budgeting advice, regardless of whether I enroll in a DMP?
How does your DMP work?
How will you make sure that all my creditors will be paid by the applicable due dates and in the correct billing cycle?
How is the amount of my payment determined? What if the amount is more than I can afford?
Don't sign up for a DMP if you can't afford the monthly payment.
How often can I get status reports on my accounts? Can I get access to my accounts online or by phone?
Make sure that the organization you sign up with is willing to provide regular, detailed statements about your account.
Can you get my creditors to lower or eliminate interest and finance charges, or waive late fees?
If yes, contact your creditors to verify this, and ask them how long you have to be on the plan before the benefits kick in.
What debts aren't included in the DMP?
This is important because you'll have to pay those bills on your own.
Do I have to make any payments to my creditors before they will accept the proposed payment plan?
Some creditors require a payment to the credit counselor before accepting you into a DMP. If a credit counselor tells you this is so, call your creditors to verify this information before you send money to the credit counseling agency.
How will enrolling in a DMP affect my credit?
Beware of any organization that tells you it can remove accurate negative information from your credit report. Legally, it can't be done. Accurate negative information may stay on your credit report for up to seven years.
Can you get my creditors to "re-age" my accounts--that is, to make my accounts current? If so, how many payments will I have to make before my creditors will do so?
Even if your accounts are "re-aged," negative information from past delinquencies or late payments will remain on your credit report.
How to Make a DMP Work for You
The following steps will help you benefit from a DMP, and avoid falling further into debt.
Contact a Detroit bankruptcy attorney that can help you decide the best course of action to take in pursuing the debt relief you deserve. I offer clients flexible appointment times and same day appointments for your convenience. Also, a free initial consultation is provided so you can speak with me about your situation without cost or obligation.
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