Debt Management Program FAQ

Easy answers to all your questions about consolidation with a DMP.

A debt management program consolidates unsecured debt, regardless your credit score. It rolls unsecured debts into one monthly payment and reduces the interest rates so you pay off the principal faster. The savings over the life of a debt management program is typically 30-50 percent of what you would pay on your own with high interest rates.

You can find out more about how a debt management program works here or you can call 1-888-294-3130 to speak to a certified financial counselor. In the meantime, the questions below are the most common questions we receive. If you’re struggling with high-interest debt payments, we may be able to help.

Q: Who do I owe once I’ve enrolled in a debt management program?

This video explains who you actually owe after you enroll in the program. Short answer – you still owe your creditors; the credit counseling agency just administers payments on your behalf…

Q: What types of debt can be included in the program?

The program is predominantly intended to address challenges with credit cards and other unsecured debts. This includes gas cards and department or specialty store cards. In some cases, you may also be able to include other debts, such as unpaid medical bills and even some payday loans. It does not include secured loans like your auto loan or mortgage, or things like federal student loans.

Q: What about debts that are already charged-off and in collections?

Even if your credit cards have been moved to a charged-off status by the original creditor and sold to a debt collector, you may still be able to use the program to consolidate the debt. This video explains how…

Q: How does a debt management program lower my payments?

With a debt management program, your monthly unsecured debt payments for accounts you put into the program is rolled into a single payment. The amount is based on the amount of debt you have and your budget. After this is determined, your credit counseling team contacts your creditors to agree on an adjusted payment schedule and reduced interest rates. The combination of possible payment reduction and interest negotiation with each creditor allows you to reduce your total payments over the life of the debt management program by about 30-50 percent.

Q: How will enrollment in a debt management program affect my credit score?

In most cases, the effect of a debt management program on the enrollee’s credit is either neutral or positive. As long as you make all of the monthly program payments on time and stick with the program through completion, your credit should not be negatively affected. That’s because you pay all of what you borrowed back on a payment schedule that each creditor agrees to accept. As a result, you build a positive credit history while eliminating all of your unsecured debt. This improves the two biggest factors in credit score calculation, so in many cases enrollees actually see their credit scores improve as a result of enrollment.

Q: How is a debt management program different from debt settlement?

A debt settlement program is designed to settle your debts for less than the full amount owed. You negotiate with the creditor to eliminate the total amount owed for a percentage of that total. As a result, you’re not paying back everything you owe. By contrast as mentioned above, a debt management program pays back everything you borrowed – you just do it in a way that’s more manageable with your budget. So while debt management has a neutral or positive effect on your credit score, debt settlement usually has a negative effect.

Additionally, most creditors won’t accept less than what you owe – this usually only happens once a debt is charged-off and sent to a debt collector. As a result, debt settlement is usually only used for debts in collections. However, as mentioned above, you may be able to include these types of debts in a debt management program along with your accounts that are still active.

Q: Do I have to enroll in a debt management program with my spouse?

You only have to enroll in a debt management program with someone else if that person is a cosigner on one of the credit accounts included in the program. So if you hold cards jointly with your spouse or even with a relative, then you have to join together. This video explains…

Q: Are there any downsides to enrollment?

It should be noted that your credit card accounts will be frozen during your enrollment – i.e. you won’t be able to use your cards while you’re paying off your debt on a debt management program. However, that’s a good thing! Adding to your debt load is the last thing you want to do when you’re struggling to pay off the debt you already have. That’s why your credit counselor helps you construct a budget that works to cover your expenses and necessities without relying on credit. You learn to live without credit instead of relying on it as the financial crutch that allows you to scrape by every month.

Q: Can I add accounts to a debt management program after I’ve already enrolled?

It’s advisable to include all of the unsecured debts that you can when you enroll initially, but in some cases an enrollee may choose to leave an account off the program, for things like emergencies. This video explains how these accounts may be able to be included even after you start making payments…

Q: What happens once an account is paid off on the program?

This quick and easy Ask the Expert video explains how the monthly payments you make are broken up between your debts and how payment disbursement changes over time as each debt included in the program gets paid off…

Q: Do I have any other options besides enrolling in this type of program?

This depends on your specific financial situation. In some cases, a consumer with a high credit score can find other methods to consolidate debt on their own, such as a personal debt consolidation loan or credit card balance transfer. Just be careful, because if you use these do-it-yourself methods in the wrong circumstances, you can actually make your debt problems worse.

As mentioned above, if you have a large number of debts in collections that simply need to be eliminated quickly, debt settlement may also be an option for you to consider if you’re willing to take the damage to your credit score. Otherwise, your best solution may be bankruptcy.

Q: Is a debt management program the same thing as credit counseling?

Not really. In fact, enrollment in a debt management program is actually just one of several conclusions to going through credit counseling – i.e. it’s the last step in the credit counseling process if it’s determined that enrollment is your best option.

Credit counseling refers to the process of consulting with a certified credit counselor to review your budget and debts to determine your best path to achieve financial stability. The counselor helps you find the right solution for your situation. In some cases, this will be enrollment in a debt management program. However, in other cases the counselor may help you reach a different solution.

Don’t wait. Get the help you need today!

As mentioned in the last answer, going through credit counseling doesn’t mean that you’re locked into enrolling in a debt management program. You can get expert advice on your best options to get out of debt so you can find the right solution for your unique needs and financial situation. So the first credit counseling session has no obligations attached to it and it’s 100% free. If you’re facing problems with debt, call Consolidated Credit today at 1-888-294-3130 to speak with a certified credit counselor.