Debt Management Program

You should sign in for Debt Management Program if:

You pay your bills late
You don't have enough money in savings to live on
You pay only the minimum amount due on your credit cards each month
You are over the limit on most of your credit cards
You have used one credit card to pay off another
You are unsure how much debt you actually have
You have difficulty sticking to a budget
You are receiving collection calls and/or past due letters from your creditors

How does a Debt Management Program work?

Debt Management Program, often called Debt Consolidation Plan is the centerpiece of any Credit and Debt Counseling that consumer usually gets when seeking debt management advice.

Based on your monthly income and living expenses, your Debt Counseling agent will work with you on a customized Debt Management Program that makes repayment to your creditors manageable. Each month you'll send to your Debt Counseling outfit a fixed amount to cover the payments  negotiated with your creditors.

For the most effective and equitable treatment of your debts, all your debts need to be included in your Debt Management Program or Debt Consolidation Plan or whatever else it is called in any given Debt Counseling bureau.

What exactly is a Debt Management Plan?

Debt Management Plan sets up a payment schedule for you to repay your debts. By voluntary agreement, you deposit funds with Credit and Debt Counseling agency of your choice each month. This Debt Management Plan agency sends those funds directly to your creditors. If collectors call, you can ask them to contact Credit and Debt Counseling bureau and it has to handle it.

You may also receive a reduction or waiver in finance and/or other charges. When you have completed your payments, your Credit and Debt Counseling group may assist you in reestablishing credit.

So as you can see Credit and Debt Counseling serves the dual role of:

Helping you repay your debt.

Helping creditors to receive the money owed to them.

And as an added bonus, after you are done with Debt Consolidation Plan, nice folks from Credit and Debt Counseling can help with reestablishing your credit.

Will I still receive phone calls from my creditors?

Once a creditor begins receiving regular payments from Debt Counseling group as part of your Debt Consolidation Plan, creditors will stop calling. If a creditor does call, you can give them your Debt Management Program account number and ask them to call your Debt Counseling group. Unless a creditor has written off your account as a bad debt, they will continue to send you monthly statements. It's important to check each statement to make sure your Debt Management Program payment has been credited to your account.  It's important to compare it to the monthly statements from your creditors and report all discrepancies to your Debt Consolidation Plan counselor.

What will happen to my credit report if I enroll with Debt Management plan?

Working with Debt Counseling and having a sound Debt Management Program is a sign to the creditors that you're trying to repay your debts. However, any Debt Consolidation Plan administrator can't tell you  for sure what your creditors will report to the credit bureaus. In any case, working with Debt Counseling entity is a far better alternative than filing bankruptcy. There are creditors that may well consider giving a new credit line to those folks who have successfully completed the Debt Management Program. Once you finished with your Debt Consolidation Plan, contact your Credit and Debt Counseling firm to get the names of creditors who may be willing to re-establish your credit.

Often, your Debt Counseling group does not report your participation in Debt Consolidation Plan to the credit reporting agencies. That is up to the individual credit grantor, and sometimes they will show an account as under credit counseling.

If I enroll in a Debt Management Plan, can I use my credit cards?

In general, once you enroll in Debt Consolidation Plan, the Debt Counseling agency that administer it will ask you to sign an agreement that you will not seek any additional credit while you are a client. Some may allow it as an emergency.

Often, your creditors will close or suspend your lines of credit. In limited cases (for example if your employer requires you to travel) one credit card may be maintained.

That is a good question to ask when choosing your Debt Management Plan.

Will anyone know I am enrolled in the Debt Management Program?

Your deal with a reputable Debt Counseling agency is a private and a confidential one. Only they, your and your creditors need to know about it. Unmarked envelopes to correspond and discreet billing description are must.

How do I make my payments?

Debt Counseling companies can automatically deduct payment from your bank account. That is by far the most preferable method to all Debt Consolidation Plans. You can always pay by money order or cashier check. But you personal check often will not do.

Can my creditors take legal action against me while I am enrolled in the Debt Management Program?

Your creditors have the right to take you to court even if you're enrolled in Debt Management Program. If that happens contact them immediately. Why would anyone take you to court is beyond any comprehension, since you have nothing much that creditors can use, but in unlikely case it happens, your Debt Consolidation Plan payment history can serve as evidence that you are repaying your debt.

What happens if I withdraw from the Debt Management Program?

Your Debt Management Program is a voluntary one. It involves not only you, but also creditors and Credit and Debt Counseling agency. By dropping out, you lose all of the advantages the program provides, including lowering your monthly payments, lowering or possibly eliminating interest, avoiding bankruptcy, learning to live within your means, and avoiding unpleasant collection calls. Think twice before doing this.

How long will it take to get out of debt?

There's no simple answer to this question because every situation is different. Your Debt Consolidation Plan counselor will look at your situation to estimate how long it will take. The average length of a Debt Management Plan  is about 36 months.

What if I want to buy a home while I am on the Debt Management Plan?

Credit grantors, especially those who might make a mortgage loan, expect consistency. When you have proved that you can pay on time for at least 6-12 months, you may be eligible for an FHA loan. It takes at least 18 months for a conventional loan. Many Credit and Debt Counseling entities belong to programs sponsored by Freddie Mac to help consumers obtain a market rate conventional loan. But FHA rates are phenomenal. It is actually often better to get an FHA loan than conventional one.

Can Counseling agency loan me money to pay off debts?

Well that is highly unlikely. The Credit and Debt Counseling folks are here to educate you and help manage debt. They are not banks. The creditors help them to help you get back on financial track through their Debt Management Plan and through money management education.

Credit grantors make concessions to help you take charge of your debt, so they will not tolerate you getting into more debt with other creditors.

How will a Debt Consolidation Plan affect my credit?

Your participation in a Debt Consolidation Plan will change your credit report. Generally, a Debt Management Plan has a negative impact on your credit rating because it is an indicator that you are or have experienced financial difficulties.

In addition, creditors may report that you are on a Debt Management Program and are not paying as originally agreed although they have accepted the reduced payment. Creditors have different credit reporting policies and a certified counselor should be able to answer your questions about the possible effect on your credit rating.

But remember, the goal of the Debt Management Program is to develop a plan to ultimately improve your financial and credit standing.

Will creditors stop charging interest on all accounts?

Your Credit and Debt Counseling adviser should be able to tell you if any of your creditors will consider stopping interest charges. However, the majority of creditors do not stop interest, but many lower the interest.

Are only problem bills in a Debt Management Plan?

For the most effective and equitable treatment of your debts, all the debts need to be included in your Debt Consolidation Plan.

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