Debt Management Program

Getting out of debt isn't easy. It takes time, patience and commitment, especially if you carry high balances, as many of us do. One strategy you can use to get out of debt is to enter a debt management program, the purpose of which is to get you back on track financially through a single regular monthly payment, while satisfying your creditors, and still meeting your regular monthly living expenses.

What is a debt management program?

A debt management program is used in conjunction with other credit counseling services to negotiate or reduce the amount you owe creditors. Debt Management Services will guide you in the creation of a household budget you can live with while executing repayment plans with your creditors. The goal with a debt management program is to maximize your available resources toward the eventual elimination of the debt you owe. A debt management program can help you:

• Consolidate unsecured debt and give you one monthly payment
• Lower monthly payments
• Lower or eliminate interest
• Stop late and over-limit fees and re-age past due accounts
• Help avoid collections, wage garnishments, or legal actions
• Help avoid bankruptcy
• Stop harassing creditor phone calls and letters
• Help you regain financial stability

How a Debt Management Program works

You are falling behind on all of your bills. You have no idea how to handle your living expenses and debts. You’re going to lose everything. Every paycheck you receive is used to play “catch up” with your creditors and bill collectors. Late fees and back payments make the future is look grim. What are you going to do?

First, establish a budget to determine your bottom line (the difference between your income and expenses). If your budget demonstrates that you can continue paying your living expenses but need help paying debts, a debt management program may be the solution to your problems.

A credit counselor will help you prioritize and allocate your money to catch up on living expenses and negotiate with your creditors to repay your debt. A credit counselor will help set up a debt management program that will help you:

• Get back on track with consistent payments
• Stay current on your bills
• Get you out of debt one month at a time
• Communicate with your creditors
• Work toward accomplishing your financial goals

One monthly payment

Under a debt management program, you make one monthly payment to the credit counseling agency, and the agency redistributes the money to your creditors. Creditors won’t contact you and agree to work with the agency as long as you make the scheduled payments. Many creditors are willing to reduce interest rates and eliminate late fees as long as they are assured you will be making regular payments via the debt management program. Some will even bring accounts to a current status by “re-aging.” When an account is re-aged, the creditor classifies the account as current, and it is no longer considered delinquent.

Your Job in the Debt Management Program

In order for any debt management program to be successful, your cooperation and commitment is required. You must be dependable, make consistent monthly payments and keep the lines of communication with your credit counseling agency and credit counselor open.

You will not be able to use credit or retail cards, or other unsecured credit while you are participating in a debt management program, nor can you apply for any new unsecured credit. Consult your credit counselor before applying for or obtaining any type of secured loan such as a mortgage or automobile loan.

The Counselor's Job

The credit counselor's job is to help you evaluate where you stand financially and what alternatives you have. Your credit counselor will help you set up a budget, look at all your income and expenses, and then set up a debt management program best-suited for your individual situation. Once a debt management program is established for you, the agency accepts your monthly payment, and then distributes that payment to your creditors, based on the percentages set up in the debt management program. The counseling agency will also communicate on an as-needed basis with your creditors, so your creditors won’t contact you. Communicate with your credit counselor regularly to keep circumstances under control.

Go to Debt Management Services page to find a program that can help lower your debt.