How to enroll into a debt management plan.
Find how to enroll into a debt management plan (DMP). These programs usually help people eliminate credit card or medical debts, student loans and other financial obligations. Non-profit credit counseling agencies, banks and even low-cost lawyers offer DMP, and learn how to find a DMP and start the debt management process.
While a Debt Management Plan may offer a structured programs that will help people regain financial stability, knowing what a DMP isn’t the same as knowing how to get started with one. Enrolling in a debt management plan involves more than just making a phone call. The enrollment process requires time and effort - you need documentation, to go thorough a evaluation of your finances, and you also need to know how to select the right organization (whether non-profit or another group) to work with. Below is a step-by-step guide on how to enter a debt management plan.
Understand your personal finances before seeking a debt management plan
Before you contact anyone that may offer a debt management plan (see below), it is important to do a preliminary review of your financial situation. Be sure you have a budget and know your debt, income, savings and other key metrics. This will help you speak knowledgeably when you begin the enrollment process. Start by gathering the following. Or even try this calculator https://www.nfcc.org/dmp-savings-calculator/ from the National Foundation for Credit Counseling (NFCC) to see if the DMP may be a good fit for you.
- A list of all unsecured debts (credit cards, medical bills, car / auto loans, personal loans and even information on your mortgage balance or monthly rent).
- The latest statements from each creditor noted above, showing balances, interest rates, and minimum monthly payments.
- Your monthly income from all sources, whether a full time job or gig work.
- A rough breakdown of your monthly expenses (housing, utilities, food, insurance, medical costs, transportation, etc.).
You don’t need perfect accuracy here to enroll into a DMP. If you are a little off on your expenses, total debt or income that is fine. But the more complete your financial picture, the better the intake process will go when you meet with a credit counseling agency or bank to try to sign up.
Find a credit counselor or company to help you throughout the DMP process
You will need to work with a counselor or a” third party” provider throughout this process. While you cannot enroll into a DMP directly with your creditors, some banks/lenders work with non-profits that offer debt management plans. So your lender can often give referrals or help you enroll. Either way, you need to find a credit counselor or company to use for a DMP. Many are part of non-profit organizations so the fee they will charge you will be minimal, with low-income families or people with no money or income able to enroll for free. Locate free credit counseling services from a non-profit near you.
- Note some for-profit companies or attorneys also offer debt management plans, and those may be an easy option too. However when working for a “fee” provider always be even more careful when signing a contract with them. Locate debt settlement services from lawyers.
Once you’ve chosen a reputable credit counseling agency or company to work with, schedule an in-person, online or phone consultation. Note the Financial Counseling Association of America (FCAA) This is often free (and you really need to question the company if not) and the first consul typically lasts between 45 minutes to During this session, a certified credit counselor will:
- Review your income, expenses, and debt. Thus being prepared as mentioned above.
- The consult may help you set up a “high-level”/general realistic monthly budget for the debt management plan. This will be a very rough estimate during the initial call.
- Determine whether a DMP is a good fit for your specific situation.
Not everyone qualifies or needs a DMP. If you can reasonably pay off your debts on your own with budget adjustments, the counselor may suggest a self-directed repayment strategy instead. It is recommended to use a professional to start the debt management plan process. When you work with a free or low-cost credit counselor, they will negotiate a payment plan directly with your creditors, including for emergencies or people that need fast help from a DMP.
Some non-profit agencies may offer free DMPs or charge you as little as several dollars per month, with help for unemployed people or those with bad credit scores or a low-income. The low cost credit counseling services receive funding from a variety of other sources, including foundation donations, contributions or donations from creditors, sale of education services, and their fees. This is what allows them to be more affordable, immediate debt management options to consumers. At that point the company will work on your behalf during the length of the agreement in place.
Signing up for a debt management plan with the company you select
If the DMP is not free, then be aware of fees or costs from the debt management company or credit counseling agency. As noted, this should be done in writing. Find out about all charges and fees charged by the company for their services. Also when signing up be sure to avoid any company that promises to “fix” your credit quickly, or urges you to stop communicating with your creditors.
Make sure you are still paying less money, even after their fees, then you would if you didn’t not use their services. Also compare costs between companies to ensure that you are not paying higher fees that what the rest of the industry has in place.
Once enrolled, the agency will notify your creditors that you are on a debt management plan. Your credit counselor will create and send a proposal letter to each of your creditors. They will offer terms of the plan to help you reduce debts or the DMP program, and request that they accept your Debt Management Plan (DMP). In many cases, creditors will close your accounts and mark them as “managed by a credit counseling agency.” You’ll begin making one monthly payment to the agency, which will then distribute funds to your creditors.
All of your creditors will be provided with the following information about your situation.
- The reason that you are requesting and filing the Debt Management Plan (DMP), whether it is because you have no income, money or are in a financial hardship.
- Information on your personal situation, including your name, address, total income, expenses, total debt, and financial condition.
- Details on all of your creditors, with the amount owed to each one.
- Detailed information on all financial obligations, such as your account number.
- Terms of the proposed repayment amount for each and every creditor, as well as exactly when the company can expect payment from you.
Make sure all your creditors are included. This includes medical providers / hospitals, unsecured loan companies (title loans or BNPL financing, etc), car loans and anyone else you owe money too. One of the primary reasons that a debt management plan (DMP) is successful is because your creditors know that they will be treated both equitably and fairly. In almost all plans, all of your unsecured debts will be included. Some DMPS can even include payday loans. Or read more on payday loan laws.
Get the DMP approved by your creditors. It is safe to ask your creditors so that before you sign on a DMP, make sure the creditors approved it. Don’t just relay on what your are told by a company or credit agency. Call the creditors directly to verify. . In many cases, creditors will close your accounts and mark them as “managed by a credit counseling agency.” You’ll begin making one monthly payment to the agency you picked for your DMP, which will then distribute funds to your creditors.
Verify your monthly payments. Make sure the company you are working with doesn't send late payments to your creditors. It is also generally wise for the client to verify that all payments are made and received each month.
Even after enrolling, you should stay actively engaged in your debt management plan. Be sure to review monthly statements from the counseling agency or company running your DMP to ensure payments are applied correctly. Let the agency know immediately if your financial situation changes (job loss, reduction in income, unexpected expenses, etc.).
What if one of my creditors does not accept the Debt Management Plan?
While this is rare, it is possible. Most creditors are happy to work and negotiate with a non-profit credit counseling agency or you, especially for families in a hardship or that have zero income. Most credit card companies, auto lenders and other organizations will agree to allow the customer to enter into a Debt Management Plan. Some may even show you how to get started. They do this because they know that they will be receiving payments from you with no further work or collection efforts required by them. Also learn tips to negotiate with your creditors.
In the rare event that one of your creditors is unwilling to agree to the Debt Management Plan, then you still have options. You and your counselor can review the situation, and you may decide it is possible to make changes to your monthly budget to free up some extra cash to pay back those bills.
As a last resort, if one or more of your creditors does not agree to the plan, you may need to file bankruptcy under Chapter 13, as that may be the next best option. But this will usually be a last resort. Locate a bankruptcy attorney near you for free consultation.
Also, in addition, it is possible to initiate your own debt management program. Rather than contract with a company to provide you with this service, you may be able to contact your creditors and in effect start your own plan. This is the so called DIY approach to a DMP. You can explore the information that is needed to start a credit card hardship programs.
Conclusion
Debt management plans readily available. There are non-profit credit counselors that help borrowers navigate the process and show them how to apply. Many counseling organizations also offer free or very affordable DMPs to low-income families or the unemployed, which makes the enrollment process is more advantageous.
Related Content From Needhelppayingbills.com
|
