What is a Debt Management Plan? And how does it work? Courtesy of
Golden State Debt Management www.goldendebt.org The term “Debt Management Plan” also known
as a DMP is a program that assists in the payment of unsecure debt using the help of a credit counseling agency Some debts that are included in a DMP are Credit cards, Collections accounts, Medical bills, Personal loans, Department store cards, Repossessions Some debts such as a payday loan and secured
debts i.e. car payment and mortgage are not eligible for a DMP. Some benefits of a DMP are consolidated bills
into one monthly payment, Eliminating of late and over the limit fees, Lower interest rate,
Ongoing financial education support, Pay off debt faster. Living with high debt can be overwhelming
and stressful, but it doesn’t have to be. Take control of your debt and reach out to
one of our certified credit counselors for a free financial consultation today
We will have an expert go through your expenses, income and debts, and create a customized
plan for managing your debt If you qualify for a DMP, we will work together
with your creditors to help waive fees, reduce your interest rate, and help you achieve an
affordable, single monthly payment.
Take advantage of our free financial consultation
and get started on becoming debt free. Call us today. Golden Debt Management
800-397-1302 www.goldendebt.org.
a debt management plan or dmp can help you feel more in control of your finances if you're struggling to repay your debts it allows you to make a single monthly payment towards your debts based on what you can afford and after you've covered your essential living costs so let's take a look at some of the benefits and risks of a dmp a dmp can be a more affordable way for you to manage your debts and at step change we don't charge any fees for managing your plan or for contacting your creditors the whole of your monthly payment goes towards repaying the money you owe and you'll be able to track your progress as you move out of debt when your dmp is up and running you'll make your payments directly to us and then we'll distribute it among your creditors then each year you'll need to review your finances and your plan with us this is important not only to make sure that a dmp is still suitable for you and for your circumstances but to also prevent your plan from being stopped so hopefully that sounds good however there are several risks that you'll need to consider a dmp shows your creditors that you're willing to pay back the money you owe and in many cases they'll stop adding interest and charges to your debts but this isn't a guarantee and they can still continue to apply interest and charges to your debt and take further action including taking you to court it's also worth remembering that because you're making lower payments towards your debts your credit file may be affected and it may take longer to pay your debts back finally it's important to get expert debt advice to make sure it's suitable for you we offer free debt advice online or over the phone we'll help you put together a realistic budget and recommend the most suitable debt solution for you if we think a dmp is your best option after getting that advice we'll give you the advice you need and be here to support you every step of the way
a debt management plan or dmp can help you feel more in control of your finances if you're struggling to repay your debts it allows you to make a single monthly payment towards your debts based on what you can afford and after you've covered your essential living costs so let's take a look at some of the benefits and risks of a dmp a dmp can be a more affordable way for you to manage your debts and at step change we don't charge any fees for managing your plan or for contacting your creditors the whole of your monthly payment goes towards repaying the money you owe and you'll be able to track your progress as you move out of debt when your dmp is up and running you'll make your payments directly to us and then we'll distribute it among your creditors then each year you'll need to review your finances and your plan with us this is important not only to make sure that a dmp is still suitable for you and for your circumstances but to also prevent your plan from being stopped so hopefully that sounds good however there are several risks that you'll need to consider a dmp shows your creditors that you're willing to pay back the money you owe and in many cases they'll stop adding interest and charges to your debts but this isn't a guarantee and they can still continue to apply interest and charges to your debt and take further action including taking you to court it's also worth remembering that because you're making lower payments towards your debts your credit file may be affected and it may take longer to pay your debts back finally it's important to get expert debt advice to make sure it's suitable for you we offer free debt advice online or over the phone we'll help you put together a realistic budget and recommend the most suitable debt solution for you if we think a dmp is your best option after getting that advice we'll give you the advice you need and be here to support you every step of the way
What is Credit Counseling? For consumers who have dug themselves into
a deep financial hole, there are multiple options for relief. Oftentimes, the first thought is that you
must file bankruptcy. While this is a valid option, it shouldn’t
be your first choice. Instead, why not consider visiting a non-profit
credit counseling center for help? After all, the credit counseling course is
mandatory in bankruptcy anyway, provided you take one from an approved agency. When you begin researching credit counseling
agencies, it is essential that you find agencies that are approved by your state’s attorney
general. They keep lists of consumer complaints about
all agencies, though this does not necessarily mean they are legitimate. You should also check with The United States
Trustee Program as they keep a list of approved credit counseling agencies After you've completed
your research, contact the agencies you are considering and “interview” them.
Here we will discuss who should consider credit
counseling, what you need to do before an appointment, what happens at the appointment,
counseling vs debt management, and pre-bankruptcy counseling. Who Needs Credit Counseling How do you determine if you need credit counseling? Generally speaking, if you are living paycheck
to paycheck, with no savings, have late payments on several obligations, and can’t figure
out how to make it to the next paycheck, credit counseling is probably the best choice for
you. When you have reached the point that creditors
are calling and harassing you about missed or late payments, credit counseling would
be an excellent idea. If you are a hairsbreadth away from losing
your home to foreclosure or having your vehicle repossessed, credit counseling can help you
made the right decisions for your financial future. Begin by gathering all your bill statements,
bank statements, paycheck stubs, and making notes about other debt or income. Then, do the math. If your expenses are more than your income,
you have a problem. How far behind are you falling each month? Are there expenses you can cut that aren’t
critical to living? For example, do you really need to pay $4
for Starbucks every day when you could make coffee at home? Or, how many times a week are you eating out? Is it necessary or is it just a convenience? What other indulgences are costing you money
you don’t need to spend? Once you review everything, and realize the
changes you can make won’t help your financial situation, it’s time to look for a credit
counselor.
Preparing Before the Appointment Once you have an appointment set, you need
to start gathering documents. Start with everything you reviewed to determine
your financial situation. Then, Consumer Education Services recommends
the following to get the most out of your counseling appointment: Statements of Your Debts • credit card debts
• personal loans • hospital bills
• home mortgages • auto loans
• student loans Only by having a full picture of your debts
can a credit counselor give you accurate and helpful advice about how to manage your debt. Statements of Your Income and Assets • proof of your income
• tax returns • recent pay stubs
• statements of your assets (bank accounts, investment accounts, and property you own) Income and assets are also essential for the
credit counselor to help you determine how best to set up a plan to pay off debt while
maintaining your cost of living.
It is truly a balancing act. Records of Expenses • rent or mortgage
• utilities • food
• transportation • routine medical expenses
• other monthly bills (cell phones, internet, cable, etc.) This information lets your credit counselor
calculate how much of your monthly income should be accessible for spending and how
much could be assigned to paying off debts. Don’t Withhold Information If you don’t provide everything to your
credit counselor, he or she can’t make a good plan for your financial situation. For instance, if you don’t disclose that
you have a second job that pays a certain amount each month, the credit counselor could
make recommendations, such as debt management, when it isn’t necessary. Only with every piece of financial information
can the credit counselor give you the best possible advice during your appointment. Appointments There are certain questions you should ask
prior to making an appointment. The Federal Trade Commission recommends that
you ask the following: What services do you offer? Avoid organizations that push a debt management
plan (DMP) as your only option Do you offer information? Do they offer free educational materials? Avoid groups that charge for information. Will you help me develop a plan for avoiding
problems in the future? A legitimate counselor will not just help
you with current problems, but also give you advice for long-term financial security.
What are your fees? Get a specific quote in writing. What if I can't afford to pay your fees or
make contributions? Legitimate credit counseling agencies will
not charge you if you can’t afford fees. Will I have a formal written agreement or
contract with you? Don't sign anything without reading it first. Make sure all verbal promises are in writing. Are you licensed to offer your services in
my state? Credit counselors for truly non-profit agencies
will be licensed and certified. What are the qualifications of your counselors? Use an organization whose counselors are trained
by a non-affiliated party. What assurance do I have that information
about me (including my address, phone number, and financial information) will be kept confidential
and secure? Find out what security the agency offers in
terms of digital information. How are your employees paid? Do they get commissions if I sign up for certain
services? If the answer is yes, go elsewhere. When you are ready to go to your appointment,
be prepared to spend 45 minutes to an hour with your counselor.
He or she will fully review your financial
situation, offer you advice on what expenses to cut, how to put together a budget, and
how best to use the income you have to not only keep up on your current payments, but
how to pay down debt at the same time. Some agencies will take the path of strictly
offering budgeting advice and how to work with your creditors to lower interest rates
for making more headway on your debt.
But, sometimes a Debt Management Plan (DMP)
is really the best choice for you. Counseling vs Debt Management Plans Credit counseling is generally about examining
your financial situation, accepting you need to work on it, creating a budget, and having
a counselor who can hold you accountable for your debt reduction strategy. Debt Management Plans are more about combining
your debts into a single payment that runs through the credit counseling agency.
In a DMP, you pay a certain amount each month
to the credit counseling agency. The agency then uses the money to pay your
unsecured debts (credit card bills, student loans, medical bills), according to a payment
schedule you and your creditors worked out. Some creditors may lower your interest rates
or waive some fees. And while you should be able to trust your
credit counselor, it’s a good idea to contact your creditors to ensure they agree to the
concessions that a credit counselor has mentioned.
This is just about protecting yourself. If you want a successful DMP, you have to
make regular, on-time payments to the agency. However, be prepared – it could take 48 months
or more to finalize your DMP. Ask your credit counselor for an estimate
on how long it will take for you to finish the plan. Most plans require that you not apply for
— or use — any additional credit while you’re on the DMP. Before you agree to take on a DMP, there are
questions that The Federal Trade Commission suggests you ask: Is a DMP the only option you can give me? Find out if the agency will offer on-going
budgeting advice and teach you money management skills instead of the DMP. How does your DMP work? If a DMP is what you choose, make sure the
plan allows all your creditors to be paid in advance of your payment due dates within
the billing cycle.
How is the amount of my payment determined? Don't sign up for a DMP if you can't afford
the monthly payment. Any agency that pushes you hard is looking
to make money, and you should go elsewhere for help. How often can I get status reports? Can I access my accounts online or by phone? Ask that the organization you sign up with
provide regular, detailed statements about your management plan. Can you get my creditors to lower or eliminate
interest and finance charges, or waive late fees? If you are promised this perk, contact your
creditors to verify this. What debts aren't included in the DMP? There will always be bills that you still
need to pay on your own. Do I have to make any payments to my creditors
before they will accept the proposed payment plan? Some creditors require you to make a payment
to the counseling agency before approving your DMP.
If a credit counselor tells you this, call
your creditors to verify before sending money to the counseling agency. How will enrolling in a DMP affect my credit? Negative information will remain on your credit
report. Legally, credit counselors cannot remove negative
reports on your credit report. Can you get my creditors to "re-age" my accounts
— that is, to bring my accounts current? If this is offered, find out how many payments
you have to make before creditors will do it. But, even with “re-aging”, past delinquencies
or late payments will stay on your credit report. If regular counseling isn’t enough and a
DMP isn’t an option, you may have to move on to filing bankruptcy.
This is an incredibly useful tool, but it
does require pre-bankruptcy credit counseling. Credit Counseling Pre-Bankruptcy Pre-bankruptcy credit counseling is required
in all 50 states. After you complete the course – and most
are available online – you’ll receive a certificate of completion that needs to be
filed along with your bankruptcy paperwork (within 15 days of your bankruptcy filing
date). To receive a credit counseling certificate,
you must complete two courses (one pre-bankruptcy and one just before the bankruptcy is discharged)
from a debt relief agency that is approved by the Department of Justice. The course requirements are outlined within
two provisions of the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005, which
requires that any person filing for bankruptcy complete financial counseling and debtor education. The first credit counseling certificate can
be earned by enrolling in a 60- to 90-minute pre-bankruptcy counseling session online. The cost is typically $50, but counseling
agencies must offer pre-bankruptcy credit counseling for free if you can’t afford
it. The credit counseling certificate you earn
will be valid for six months, giving you the opportunity to decide if you want to proceed
with a bankruptcy. If you decide to move forward with bankruptcy,
you must complete the online session.
Before you begin the session, make sure you
have all of your financial information available: • Income statements (paystubs, Social Security
payments, spousal support, child support) • List of expenses (including your mortgage
or rent payments, groceries, car insurance, homeowner’s/renter’s insurance, utilities,
childcare, regular medical expenses, transportation, etc.)
• Debts you owe (credit cards, student loans, personal loans, auto loans, etc.) For each debt, you must provide the total
amount you owe, the interest rate (either fixed or APR), monthly payments (minimums),
the account number, and whether or not anyone else is on the account.
As you proceed through the course, you will
be offered guidance on budgeting, lowering your monthly expenses, and other courses of
action that may be preferable to filing bankruptcy. A Chapter 7 bankruptcy (less common) takes
around 6-12 months. Chapter 13 (more common and known as bankruptcy
reorganization) can take years. It’s important that you determine the course
of action that works best for your situation. CC Advising offers the pre-bankruptcy counseling
at ccadvising.com. Conclusion For families in dire financial straits, credit
counseling can be a saving grace. It’s an opportunity to learn how to properly
budget your income to cover your expenses, learn how to avoid getting into more debt,
and how to cut back on unnecessary expenses. You can learn about debt management plans
and how bankruptcy may or may not be a good idea for you.
The most important thing to remember is that
credit counseling is about solving your existing financial problems and avoiding new ones in
the future..
