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Definition
Also Known As
A Debt Management Plan (DMP) is a structured repayment program arranged by a nonprofit credit counseling agency in which you make one monthly payment to the agency, which then distributes the money to your creditors. As part of the arrangement, the agency often negotiates lower interest rates with your creditors, helping more of each payment go toward your balance. A DMP pays your debts in full; the FTC notes a plan can take 48 months or more to complete. It's important to understand that a DMP is different from debt settlement: with a DMP you repay what you owe, while settlement aims to resolve debts for less than the full balance. DMPs are commonly used for unsecured debts like credit cards. Whether a DMP fits your situation depends on your income, the types of debt you carry, and your creditors' willingness to participate.
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Credit Counseling Repayment Plan
Debt Consolidation Program
Nonprofit Debt Management Program
Used in Context
- After meeting with a nonprofit credit counselor, Maria enrolled in a DMP to combine five credit card payments into one monthly amount at a reduced interest rate.
- Because his debts were unsecured and he had steady income, the counselor recommended a DMP rather than debt settlement so he could pay his balances in full.
How long does a Debt Management Plan take?
A DMP pays your debts in full; the FTC notes a plan can take 48 months or more to complete. The exact timeline depends on how much you owe, the interest rates your counseling agency negotiates, and how much you can afford to pay each month toward the single consolidated payment.
Is a DMP the same as debt settlement?
No. A DMP is different from debt settlement. With a DMP you repay your debts in full through a nonprofit credit counseling agency, often at a lower interest rate. Debt settlement instead aims to resolve your debts for less than the full balance, which carries different risks and consequences.
Who sets up a Debt Management Plan?
A DMP is arranged by a nonprofit credit counseling agency. You make one monthly payment to that agency, and it pays your creditors on your behalf, often after negotiating lower interest. Whether creditors participate varies, so a counselor reviews your specific debts first.
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