Debt Management Plans

Learn about the Pro's and Con's of enrolling in a debt management plans with your credit counselor.

For more information, read Knee Deep in Debt

Debt Management Plan Pro's

A debt management plan is a repayment plan setup betweeh you and a credit counseling agency. Usually, the consumer is less than 60 days late on paying creditors. You can get big breaks on interest rates and save 25-50% on your monthly payments. The idea is that creditors don't want to have to write off your account as bad debt(They will generally get less than .20 to the dollar). They will waive some off the fees and set a lower interest rate in exchange for you making a good faith effort.

When you enter into a deal with the credit counseling agency, creditors know that everyone is giving you more or less the same breaks -- so that you won't default. It's a win-win. The benefits generally take 2-3 timely payments to take effect.

Debt Management Plan Con's

You are generally prohibited from opening new credit lines while you are enrolled in the program, which takes 3-5 years generally. This is to ensure current creditors know they have a good chance of collecting the entire debt; otherwise they wouldn't cut you breaks in the first place.