I never did join a DMP, as the debt councilor felt that with proper restructuring and debt consolidation I would be able to handle the loans properly. But I know that a lot of people are interested in knowing more about DMP – and if you do end up in a situation where even after debt consolidation you have a problem making your monthly payments, then DMP may be right for you.
In general, if your financial problems stem from too much debt or your inability to repay your debts, a credit counseling agency may recommend that you enroll in a debt management plan (DMP). A DMP alone is not credit counseling, and DMPs are not for everyone. Don’t sign up for one of these plans unless a certified credit counselor has spent thoroughly reviewed your financial situation and has concluded DMP may be the right choice for you. Even if a DMP is advisablein your situation, a good credit counseling agency can still help you set up a budget and teach you good home financial management skills.
When you participate in a DMP you will deposit money with you credit counselling agency each month. They will then use your deposit to pay your debts – such as your home loans, student loans, credit card bills etc. Under such a scheme the agency may negotiate with your lenders in order to try to make them accept lower interest rates or waive certain fees. A DMP requires you to make regular payments on time and it could take up to 48 months to complete your DMP. You will usually be asked to agree to economic limitations for yourself during the DMP – such as agreeing not to apply for further loans or credit cards while participating in the plan.
If a DMP is the right thing for you, make sure to sign up for a plan with an agency that allows all your creditors to be paid prior to your payment due dates and with the correct billing cycle.
Always make sure to pay your bills on time yourself until your creditors have approved the DMP. If you stop making payments to a creditor before he has accepted your DMP, you may face late payment fees, penalties, and negative credit score.