Managing multiple credit cards can feel overwhelming. It gets hard to keep track of different due dates, minimum payments, and interest rates. And keeping track of how each payment fits into your budget can feel impossible.
If your debts have high interest rates, even if you are making the minimum payment, it can feel like you are never making progress. If you find yourself in this position, it may be hard to know what your next steps are. But don’t give up. There are other ways forward, including a Debt Management Plan (DMP).
This guide will walk you through what DMPs are, how they work, their benefits and limitations, and how to find reputable help.
What is a DMP?
A Debt Management Plan (DMP) is a structured way to repay certain debts with the help of a nonprofit credit counseling agency. A credit counselor works with you to create a repayment plan that simplifies your payments and may help lower interest rates or fees. A DMP isn’t a loan or debt forgiveness, and it won’t eliminate debt overnight—but it can provide a clearer path toward paying it off.
With a DMP, you will make one monthly payment to the agency. They will divide that payment up and make payments to the creditors included in the plan on your behalf. While you are on a DMP, participating creditors may agree to lower interest rates and monthly payments, waive certain fees, and provide financial resources and education.
A DMP is not a new loan, so you are not replacing multiple debts with a consolidation loan. It is also not a debt settlement program because the goal is to repay enrolled debts in full, not negotiate a reduced payoff.
How does a DMP work?
If you’re interested in setting up a DMP, here are the five steps you will typically need to take.
- Meet with a nonprofit credit counselor: This initial appointment may take place by phone, online, or in person. Often it will be free, but it’s best to verify this before you schedule. When you talk to the counselor, they may ask you to gather information on your income, living expenses, and credit cards. The credit counselor may also review your credit report (if so, confirm it is a soft inquiry).
- Review your budget, debts, and financial goals: A counselor will look at your full financial picture, not just the total debt. This review will see if you have enough monthly income to cover basic needs and make a sustainable DMP payment. During this conversation, you can also get help identifying the cause of your debt.
- Determine whether a DMP is appropriate: Once your information has been reviewed, your counselor will help you identify which creditors may participate. They can also get you an estimate for the proposed payment, fees, concessions, and payoff timeline for your debt. After you get this information, you can compare the proposal to other options before deciding. Going through the counseling process does not obligate you to enroll.
- Enroll (if you choose): If the plan is a good fit and makes sense with your budget, you can enroll. You will review and sign the agreement. As always, make sure you understand all the terms and any associated fees. Typically, you’ll need to close your participating credit accounts and ensure that your creditors accept the proposed agreement. Also, remember to be clear on when you’ll switch from paying your creditors directly to paying your nonprofit credit counseling agency.
- Make one monthly payment to the counseling agency, which then pays your creditors.
What debts can be included?
Be clear on what debts will and won’t be included. Most DMPs are designed for unsecured debts. These are debts not backed by collateral that a lender can repossess. Here are some common debts that may be included:
- Credit cards
- Store cards
- Some personal loans
At the other end of the spectrum, here are some debts that are usually not included:
- Mortgages
- Auto loans
- Student loans
- Medical debt (Medical debt—some medical debts can be addressed by a counseling agency, but inclusion varies by agency, creditor, and collection status).
- Tax debts
- Court judgments
- Child support
Benefits of a DMP
The actual benefits of a DMP depend on the participating creditors and your individual situation. But there are several potential benefits to consider.
- One monthly payment: this consolidates the administration, not the debts themselves. It will give you fewer separate due dates (but watch the due dates on debts not included in the plan).
- Lower interest rates, monthly payments, and fewer fees: while you are on the plan, creditors may reduce interest rates and monthly payments. They may also waive or reduce late fees or other charges. Lower costs may allow more of each payment to go toward principal, helping you reduce your debt more quickly.
- Clear payoff timeline: being on a DMP gives you an estimated monthly payment and payoff timeline. This visible endpoint can make progress easier to measure.
- Professional support and accountability: when you are on a DMP, you have access to a counselor. This means you don’t have to manage the whole thing yourself. It also means that you have someone in your corner when you are communicating with creditors or have questions during the plan.
Things to consider before enrolling
While DMPs offer help if you’re struggling with several unsecured debt payments, there are things you need to consider before enrolling.
- Most credit card accounts are closed while on the plan. This can affect your credit utilization and account age, which may, in turn, affect your credit score.
- You generally can’t open new credit during the program. This helps prevent you from getting into more debt while you are on the plan. You should consider any upcoming needs that might require you to borrow money.
- You need the payments to remain affordable. Missing payments may cause you to lose negotiated benefits. Before enrolling, review your budget to make sure you can afford the payment alongside your other essential expenses.
- There may be modest setup and monthly fees. These fees can vary by agency and by state. Be sure you understand the fees associated with the plan that you are considering. Get all fees in writing and confirm whether they are included or added to the quoted monthly payment. If you are facing low income or hardship, you can also ask the agency you are working with if they can reduce or waive fees.
- Not every creditor has to participate. Creditors are not necessarily required to accept the proposal or offer the same concessions. Ask your counselor what happens if a creditor declines.
Who is a DMP best for?
- Has several unsecured debts, particularly high-interest credit cards.
- Can repay the principal but needs lower interest, fewer fees, or a more manageable structure.
- Has a steady enough income to make the proposed payment consistently.
- Is struggling to make progress because interest absorbs much of the monthly payment.
- Wants professional guidance and accountability.
- Is comfortable closing enrolled credit card accounts.
- Does not qualify for an affordable consolidation loan, or does not want to take out another loan.
There is no universal debt amount at which a DMP becomes the “right” fit. Affordability, debt type, income stability, and your individual goals matter more than a balance threshold.
When a DMP may not be the best option
While a DMP can be very helpful in the right circumstances, it isn’t for everyone. A DMP may not be the best option for you if:
- Most of the debt is secured debt, student loans, tax debt, medical debt that cannot be enrolled, or another ineligible obligation.
- You can repay your debts independently using a snowball or avalanche method without needing creditor concessions.
- Income is too unstable to maintain the required monthly payment.
- You need to open credit soon, and the plan’s restrictions would interfere with that need.
- You are facing lawsuits, wage garnishment, foreclosure, repossession, or another urgent legal situation requiring legal advice.
- You are seeking debt forgiveness rather than full repayment.
Even if some of these scenarios fit your situation, it may still be helpful to speak with a nonprofit credit counselor before deciding. A good counselor can help compare self-directed repayment, hardship programs, consolidation, settlement, and—when appropriate—consultation with a bankruptcy attorney.
DMP vs. other debt payoff options
As you consider a DMP, it’s a good idea to compare it with other debt payoff options that might fit your situation better. Here are five different debt payoff options that you can consider.| Option | How it works | Best for | Important consideration |
|---|---|---|---|
| Self-directed payoff | You make minimum payments and direct extra money using a snowball, avalanche, or other strategy. | Someone who can afford payments and wants full control. | Creditors do not automatically reduce rates or fees. |
| Debt management plan | A nonprofit agency combines your eligible debts into one payment with potentially lower interest rates, payments and fees. | Someone able to repay eligible debt but needing structure or relief from high interest. | Accounts are generally closed, fees may apply, and repayment can take several years. |
| Debt consolidation loan | A new loan pays off several debts, leaving one loan payment. | Someone who qualifies for a meaningfully lower rate and can avoid accumulating new card balances. | A low advertised rate is not guaranteed; fees and a longer term can increase total cost. |
| Debt settlement | The borrower or a company attempts to negotiate payment of less than the full balance. | Sometimes considered when debts are seriously delinquent and full repayment is not feasible. | It can involve missed payments, added fees, collections, lawsuits, credit damage, and possible tax consequences. |
| Bankruptcy | A federal legal process may discharge or reorganize qualifying debt. | Someone whose debt cannot realistically be repaid or who needs legal protection. | It has legal and financial consequences; consult a qualified bankruptcy attorney. |
Understanding your options can help you make the best choice for your situation. With a DMP, no new money is borrowed, and creditors typically receive repayment of the enrolled balance.
How to find a reputable nonprofit credit counseling agency
When looking for a reputable nonprofit credit counseling agency, start with established professional networks. Don’t click on the first debt-relief advertisement in a search result. To help the process, you can use the NFCC agency finder.
When you are comparing agencies, find one that:
- Has verified nonprofit status.
- Employs trained or certified counselors.
- Reviews the client’s full financial situation before making any recommendations.
- Discusses alternatives rather than presenting a DMP as the only choice.
- Clearly explains services, creditor arrangements, fees, risks, and cancellation policies.
- Provides the agreement in writing.
- Offers educational and budgeting support.
- Does not use high-pressure sales tactics.
- Is willing to explain how counselors are compensated and how the organization is funded.
SaverPerks partners MMI and Greenpath are both NFCC-certified non-profit credit counseling agencies worth a look.
Potential questions to ask
Here is a list of questions to help you fully understand your options.
- Is the initial counseling session free?
- Are your counselors certified, and by which organization?
- What are the setup fees, monthly fees, and any other costs?
- Can fees be reduced or waived based on my income?
- Is the fee included in the quoted monthly payment or added to it?
- Which of my debts and creditors can be included?
- Have my creditors agreed to participate?
- What interest rates, fee waivers, or other concessions are expected?
- Are those concessions guaranteed or subject to creditor approval?
- What will my total monthly payment be?
- How long is the estimated repayment period?
- How much will I pay in total, including agency fees?
- Which accounts will be closed?
- May I keep any credit card open for emergencies, work travel, or another specific need?
- What are the rules about applying for new credit?
- How might the plan and account closures be reported to the credit bureaus?
- When should I stop paying creditors directly and begin paying through the agency?
- How can I verify that creditors receive payments on time?
- What happens if I miss a payment or my income changes?
- Can I make additional payments or pay the plan off early?
- Can I cancel the plan, and are there cancellation fees?
- What support will I receive after enrollment?
- What other options should I compare with this plan?
The bottom line
A DMP can make your high-interest unsecured debt more manageable by creating one payment, providing a defined repayment path, and potentially reducing rates, payments, or fees. It does not erase your debts or solve every financial situation. Success on a DMP requires an affordable payment, consistent participation, and a willingness to live with a restriction on credit.
Begin with a complete financial review through a reputable, nonprofit agency. Be sure to ask for the proposed payment, fees, creditor concessions, timeline, and alternatives in writing. Compare the proposal with other realistic options to find what’s best for you. The right solution is the one that addresses your actual debts while leaving enough room in your budget for essential expenses and a sustainable financial life.
Read more: Decision Tree: Find Your Best Debt Payoff Plan.
