Debt Management Plans -- What You Should Know Before Enrolling

Debt management plans can seem like the ultimate fix for repairing your finances after credit problems. If you are carrying too much debt and think you might have to file for bankruptcy, most credit counseling centers recommend that you enroll in a debt management plan (DMP) first so that you can better understand the nature of your problem and learn some better money management skills. When you enroll in a debt management plan, you are responsible for paying a monthly deposit with the credit counseling organization so that they can pay your bills on schedule.

You are paying for a service and may be able to reduce some stress about paying your bills on time and getting your finances organized. However, there are some important things to consider before you enroll in a debt management plan.  Here’s what you need to know about debt management plans and credit counseling services:

1. Ask about payoff estimates. Make sure you understand what the length of the payment plan will be before you enroll in a debt management plan. In most cases, it will take up to four years (48 months) to pay off your debts completely. You need to know what the length of your payoff term is before you sign up.

2. You will still need to monitor statements. Even though your debt management plan service provider will be responsible for making all payments on time, it’s still important to check our statements regularly to make sure your creditors are being paid properly. If you notice a problem, you will need to contact the organization responsible for your DMP immediately.

3. Look for a range of services. The FTC recommends that you look for an organization that offers a wide range of services, including budget counseling, debt management classes, and other money management resources. You should be able to work with counselors who are trained and certified in consumer credit, budgeting and all aspects of money management.

4. Read reviews. Find out if other customers have been satisfied with the service they received, and if there have been any complaints filed with your local Better Business Bureau or other state consumer agencies. Make sure you are working with a reputable debt management plan provider and one that has a track record of positive customer reviews.

5. Ask about the fee schedule. Every credit counseling service provider has different fee schedules, and some require a monthly maintenance fee and a setup fee. Make sure you understand what these fee schedules are and ask if the organization would waive any of the fees given your circumstances. It never hurts to ask, and you should be fully aware of what types of fees you are responsible for before enrollment.

Debt management plans have their pros and cons, and there are several things you need to do before you enroll. Use these tips as a guide for selecting a debt management plan from a reputable credit counseling service provider, and one that will help you better manage your finances as you move ahead.