Debt management plans: See if one is right for you

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If you’re sending money to creditors every month but it doesn’t seem to make a dent in your debt, a debt management plan may help.

Under a debt management plan, a credit counselor will help you negotiate better loan terms, roll your debts into one monthly payment and set up a realistic plan to gradually pay off your debt.

Here’s how a debt management plan can provide the resources, accountability and structure you need to pay off your debt.

What is a debt management plan?

A debt management plan (DMP) is a payment schedule that allows you to consolidate debts into one affordable payment every month and pay down your debt over time, usually over three to five years.

First, you’ll meet with a counselor who reviews your credit reports and bills, helps you create a budget and discusses your payment options. If you agree a DMP is the best choice for you, the counselor will contact your lenders and try to negotiate your loan terms. For example, your credit card issuers may agree to lower your interest rates or monthly payments, waive fees or reduce the amount you owe.

Each month, you’ll make a single payment to the credit counseling agency, which distributes the money to all of your creditors. The agency may also charge you a setup fee along with a small monthly fee for the service. The fee amount depends on state regulations, but you may be eligible for a fee waiver if you meet certain income qualifications. Your overall monthly payment should cost less than what you were paying before entering the plan.

Pros and cons of debt management plans

Before moving forward with a debt management plan, review all of your options and consider the pros and cons:


  • You’ll have a single payment each month that’s likely lower than what you’re paying on your combined debts now.
  • You’ll save money if the counselor is successful in negotiating lower interest rates and fees.
  • Phone calls and letters from collection agencies will stop while you make payments.
  • You’ll know exactly when you’ll pay off your debt.
  • A debt management plan has much less impact on your credit than a bankruptcy or debt settlement if you pay off the entire original balance.


  • A debt management plan won’t fix an underlying problem with overspending.
  • Generally, these plans are only available for debt that’s not secured by collateral, such as a house or car.
  • If the credit counselor asks you to close your credit cards before entering the debt management plan, your financial resources and access to credit will be limited. Closing your credit cards will also likely have a negative effect on your credit.
  • Your creditor may add a note to your credit reports that says you’re in a debt management plan. Although this shouldn’t hurt your credit scores, it will signal to lenders that you shouldn’t take out new credit.
  • Some of your creditors may not agree to a negotiated plan.

Who should consider a debt management plan?

Debt management plans are usually best for people who are deeply in debt but can still make the required monthly payment. You’ll also have to check whether your debt qualifies for the plan.

There are alternatives to a DMP, such as bankruptcy or a debt consolidation loan. A qualified credit counselor can help you figure out if a debt management plan is right for you. To find one, look to the National Foundation for Credit Counseling or the U.S. Department of Justice; both maintain lists of reputable credit counselors. 

Best debt management companies

As you research companies that offer debt management plans, ask about the monthly fee, the setup fee, how long it may take to complete the plan and which types of debt you can include. Then ask the company about its track record: How many people complete the plan, and how much do they save over time?

The companies highlighted below all have an A+ rating with the Better Business Bureau:

InCharge Debt Solutions

This company says the average person completes a DMP within three to five years and pays an interest rate of around 8 percent. The average setup fee is $40 (max $75) with an average monthly fee of $25 (max $55).

Money Management International (MMI)

MMI is a nonprofit credit counseling agency that’s available in all 50 states and offers help online, over the phone and, in some states, in person. Members usually complete a DMP within three to five years. The monthly fee ranges from $0 to $50, while the setup fee goes up to $75.

GreenPath Financial Wellness

Members typically repay their unsecured debts within three to five years. The one-time startup fee ranges from $0 to $50, while the monthly fee ranges from $0 to $75, depending on the state you live in and how much debt you owe.

Cambridge Credit Counseling

This nonprofit credit counseling agency says clients usually complete the debt management program within 48 months on average and save around $140 per month. Cambridge counselors say they are typically able to negotiate interest rates from about 22 percent down to 8 percent on average. Startup and monthly fees vary by state, but the average monthly fee is $30 and the average startup fee is $40.

Alternatives to a debt management plan

A debt management plan isn’t for everyone. As you do your research, consider these other options as well:

  • DIY plan: Setting up your own debt management plan helps you save on fees you would otherwise send to an agency. First, make a list of each debt along with the monthly minimum payment, interest rate and any fees the lender is charging you. Figure out how much money you can realistically spend on the debt each month, and figure out how many months it will take you to become debt-free. Then call your lenders and ask about hardship programs. Tell them how much you can afford to pay each month (and for how long), and ask for a lower interest rate.
  • Debt consolidation loan: These allow you to take out a new loan, usually with a lower interest rate and better terms, to pay off your high-interest debt. Then, you pay off the new loan over time. This type of loan can make debt more manageable because you make just one payment a month in the same amount. That may simplify your payments and help you save on interest over time. Plus, you won’t have to pay monthly fees to an agency.
  • Bankruptcy: This legal process can help certain people either discharge or repay some or all of their debt. It may be a viable option depending on your situation, but it does have long-lasting financial consequences. Your credit score will likely drop, and it may be tough to qualify for credit for a few years after the bankruptcy discharge. Talk with an attorney or credit counselor before choosing this option.
Written by
Kim Porter
Contributing writer
Kim Porter is a personal finance expert who loves talking budgets, credit cards and student loans. In addition to serving as a contributing writer for Bankrate, Porter also writes for publications such as U.S. News & World Report, Credit Karma and When she's not writing or reading, you can usually find her planning a trip or training for her next race.