Making a Debt Management Plan Work
Are you thinking about using a debt management plan to gain relief from the money that you owe?
This guide will help you understand whether the strategy will work in your favor.
A Debt Management Plan or DMP is completely voluntary.
To get started, you need to use a credit counseling agency.
They will help you set up the plan based on the amount of money you owe, the interest rates that you are dealing with, and your current earnings.
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The benefit is that it should make your debt easier to handle and manage.
Rather than juggling multiple payments each month, you make one payment to the credit counseling agency which then ensures that it reaches the appropriate creditors.
There are both benefits and disadvantages to consider when exploring a debt management plan.
In most cases, there won’t be any additional interest.
However, you will be expected to pay all the debt you owe back in between 48 and 60 months.
This can mean that you need to make a high payment each month. So, when is this going to work?
When Will Debt Management Plans Be Necessary?
It could be a beneficial solution if your debt is mainly to a few large financial companies or banks.
You will of course also need the income necessary to complete the payments.
If you can tick off both these boxes, then you will find a debt management plan is a smart choice for you due to lower interest.
However, if you have various creditors from families to payday loan companies then a plan like this won’t work in your favor.
It won’t cover the majority of your debt.
Other Debts It Won’t Include
If you have any outstanding loans with a payday loan company, they don’t tend to deal with credit counseling agencies which is a problem because these loans have massive levels of interest.
Your creditor cannot be forced to cooperate with a debt management plan, so there is nothing you can do if they choose not to accept your offer.
Credit counseling agencies do not have the authority to deal with the government for you, which means if you owe a tax debt, you need to handle this independently.
This has to be sorted directly with the government, so you can hire a lawyer to represent you if you wish, or even an accountant.
You need to keep in mind that if you’ve reached the point where you have a court order against you from a creditor, then they are unlikely to respond to any kind of debt management plan.
If they have already gone through the process of suing you, the only way they are going to cooperate is if they are forced to through other means such as bankruptcy or a consumer proposal.
Are you ready to set up a debt management plan?
Contact us today and we can help you proceed here or discuss with you alternate possibilities that could be more favorable.