Do You need a Debt Management Plan

Robert Hughes

If you were to find yourself in financial trouble you could enroll in a debt management plan (DMP) through a credit counseling organization. There are nonprofit and fee based organizations.

Quality credit counseling organizations use certified and trained counselors. These counselors are trained in money, consumer, credit and debt management and budgeting.

Many may claim that a debt management plan is the only way to go before they've checked your financial situation. Also, many don't offer education and counseling.

The nonprofit organizations have a legal obligation to provide education and counseling. Not all counseling organizations offer these services. Some do not disclose all the fees involved or try to get you to make a voluntary contribution. There have been credit counseling organizations that claim to be nonprofit when they are not. Some have even received nonprofit status by misrepresenting their business practices to regulators.

A credit counseling organization works with you and your creditors. Sometimes they are able to get your creditors to waive certain fees and/or lower your interest rate. In a debt management plan you deposit money with a credit counseling organization. These organizations then uses this money to pay your medical and credit card bills and other unsecured debts.

You may not need to enroll into a DMP. Your credit counselor may be able to work with you and set a plan of action. Below is a list of questions to ask if you decide to use a credit counseling organization.

1. Are you licensed in my state?

2. Do you offer free information?

3. What services do you offer?

4. What are the qualifications of your counselors?

5. What are your fees?

6. How do you keep personal information about your clients secure and confidential?

7. How are your employees paid?

8. Will I have a formal written agreement?

Avoid organizations that has not fulfilled the requirements of your state and that charge for information about their services. You want an organization that offers services such as; budget counseling, savings and debt management classes. You want counselors that are trained and certified in consumer credit, money and debt management and budgeting. The counselors should be trained and certified by an outside organization. Get detailed information on all fees involved. Credit counselors handle you most sensitive information, you want to be sure it is protected. Do not use a credit counseling organization that will not disclose what compensation it receives. Get everything in writing and the terms carefully before signing or committing to anything. Some will try to get you to commit right away. If they do hangup if you are on the phone or walk out if you are at their office.

Once you decide and get your plan set be sure to check with your creditors. You will want to make sure that they have agreed to the plan. Do this before sending money to the credit counseling organization.

Once your creditors have agreed to the plan, make sure you;

make all payments on time.

read your statements every month to make sure that your creditors are being paid.

contact your counselor if you can not make a payment.

contact your counselor if you see that your creditors are not being paid.

Remember one thing, it doesn't matter whether fail to make a payment or your credit counseling organization fails to make a payment, you could loss everything that you have gained so far. Lower interest rates, waived fees, everything.

If your credit counseling organization happens to go out of business you need to do these right away;

Stop payment to the credit counseling organization if you are using automatic payments.

Start paying directly to your creditors.

Notify your creditors that the credit counseling organization has gone out of business.

Order a copy of your credit report.

At this stage you could consider negotiating with your creditors yourself. If you have lost your low interest rate or waived fees you might be able to get your creditors to reinstate them. Some may, some may not and some may not be able to. It never hurts to try. Of course, you could do all of this on your own but, if you don't think you can, find a reputable credit counselor.