What is a debt management plan?

A debt management plan (DMP) is a program designed to assist individuals in managing and repaying their debts. It is offered by credit counseling agencies as a practical solution to help individuals regain control of their finances. A DMP involves working with a credit counselor who assesses your financial situation, helps you develop a personalized budget, and negotiates with your creditors to lower interest rates or waive certain fees. Once the plan is established, you make a single monthly payment to the credit counseling agency, and they distribute the funds to your creditors on your behalf. The DMP typically aims to consolidate multiple debts into one affordable payment, reduce interest rates, and provide an achievable timeline for debt repayment. It does not erase any debt but serves as a structured approach to gradually becoming debt-free.