All You Need To Know About Debt Management Plans

Posted on November 16, 2017 By


You need to have strong financial planning to handle all of your debts and liabilities systematically. But sometimes, due to uncertain economic and personal circumstances, you may face problems in settling pending payments. This can be extremely stressful and more than that, it will affect your credit scores adversely. Get help from debt management plans to control your financial crisis before it is too late. DMP is an informal debt management solution, where expert consultants of credit management agencies assist and guide you on how to settle debt liabilities. You can find various options from credit counselors on

Situations where going for debt management plan is a good idea include when you are able to pay your creditor a lower monthly payment than agreed on or if you need an extension in the period of payment. The first task is to identify a credit counselor who will review your current financial crisis by analyzing details of your assets, debt and income, and figure out the best possible option to simplify the situation. They may negotiate with your creditor for some leniency in interest rates, monthly payments or an extension of repayment time. However, they cannot leverage any legal pressure on the creditor as he needs to accept the terms offered voluntarily.

Remember the DMP arrangement can only be used to settle down unsecured credits which may include credit cards, personal loans, overdrafts, family and friend’s debt, payday loans and other short-term loans and liabilities. Other debts like mortgage, rent amount, utility bills, tax liabilities, children maintenance or any legal fines are not part of the scope of DMP.

A few debt issues addressed through debt management plans are:
• Repaying your pending debt: The best a counsellor can do is to make your creditor agree to waive off some fines and fees, interest rates etc.
• Your credit agency can ask the creditor to extend the repayment time, but not beyond four or five years.
• Some of your creditors may not agree to these arrangements and they are excluded as this agreement is not a legal binding.

Under this arrangement, you transfer a monthly lump sum into the account of the credit counsellor, who in turn makes the payments to respective creditors on your behalf. The cost of hiring their services includes a setup fee and later on, a handling fee for each time a payment is made.

There are specific advantages to DMP. The DMP credit agency takes care of all the coordination and payment of the respective shares of each creditor. You will not have to deal with all the pressure of continuously following up. As per the underlying terms of DMP, your creditor cannot chase you for dues when it is being handled under a debt management plan. Your assets will not be at risk since DMP is only for unsecured loans. In case you default, the creditor has no right to acquire or auction your assets. Since DMP has no legal implications unlike bankruptcy and insolvency, it is not mandatory for you to share with anyone that you are using debt management plan to settle your debts.


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