Debt Management Plans
Reputable credit and debt counseling organizations employ counselors trained in consumer credit, money and debt management, and budgeting. Those credit and debt counseling organizations that are nonprofit have a legal obligation to provide education and counseling.
But not all nonprofit credit and debt counseling organizations provide these services. Some credit and debt counselors charge high fees, not all of which are disclosed, or urge you to make “voluntary” contributions that can cause you to fall deeper into debt.
Many credit and debt counseling agencies claim that a debt management plan is your only option before they spend time reviewing your financial situation, and offer little or no consumer education and counseling. Other nonprofit credit and debt counseling services misrepresent their nonprofit status or fraudulently obtained nonprofit status by misrepresenting their business practices to regulators.
Anyone With A credit and debt counseling agency DMP
Credit and debt counseling organizations that advertise credit counseling often arrange for consumers to pay debts through a debt management plan (DMP). In a DMP, you deposit money each month with a credit and debt counseling organization. The credit and debt counseling organization uses these deposits to pay your credit card bills, student loans, medical bills, or other unsecured debts according to a payment schedule they’ve worked out with you approved by your creditors.
Creditors may agree to lower interest rates or waive certain fees if you are repaying through a DMP, but generally do not reduce your monthly payment bry much.
Some credit and debt counseling organizations that offer DMPs have deceived and defrauded consumers, and recommends that consumers check their bills to make sure that the credit and debt counseling service provider fulfills its promises.
If you are paying through a DMP, contact your creditors and confirm that they have accepted the proposed plan before you send any payments to the credit and debt counseling administering your DMP. Once the creditors have accepted the DMP, it is important to:
• make regular, timely payments.
• always read your monthly statements promptly to make sure your creditors are getting paid according to your plan.
• contact the organization responsible for your DMP if you will be unable to make a scheduled payment, or if you discover that creditors are not being paid.
You need to be aware that if payments to your DMP and creditors are not made on time, you could lose the progress you’ve made on paying down your debt, or the benefits of being in a DMP, including lower interest rates and fee waivers.
Although creditors may have forgiven late payments that you made before you began the DMP, the creditors may be unwilling or unable to do so if payments are late after you have enrolled in a DMP.
If you fall behind on your payments, you may not be able to have your accounts “re-aged” again (reported as current), even if you start a new DMP with a new counselor.
That means your credit report will have “late” marks and you will rack up late fees, which, in turn, will lead to more debt that could take longer to pay off.
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