Reputable credit counseling organizations can advise you on managing your money and debts and help you develop a personalized plan to deal with your money problems. An initial session typically lasts an hour, and maybe some follow-up sessions and workshops.
Debt Management Plans: 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)… Don’t sign up for one of these plans unless and until a certified credit counselor has spent time thoroughly reviewing your financial situation, and has offered you customized advice on managing your money.
How a DMP works: The counselor will develop a payment schedule with you and your creditors. Your creditors may agree to lower interest rates or waive certain fees to accommodate the plan. You will agree to deposit timely payments to the counselors trust account from there they will pay your unsecured debts, like credit cards, student loans and medical bills etc. Most likely you will be required not to apply for/or use any additional credit will participating in the plan.
Is a DMP Right For You? Here are some other important questions to ask if you’re considering enrolling in a DMP.
- How does your DMP work? How will you make sure that all my creditors are paid by the applicable due dates and in the correct billing cycle?
- How is the amount of my payment determined? What if the amount is more than I can afford? Don’t sign up for a DMP if you can’t afford the monthly payment.
- How often can I get status reports on my accounts? Make sure that the organization you sign up with is willing to provide regular, detailed statements about your account.
- What debts aren’t included in the DMP? This is important because you’ll have to pay those bills on your own.
- Do I have to make any payments to my creditors before they will accept the proposed payment plan? Some creditors require a payment to the credit counselor before accepting you into a DMP. If a credit counselor tells you this is so, call your creditors to verify this information before you send money to the credit counseling agency.