by Linda Jacob, AFC®, CFP®, Consumer Credit of Des Moines
If you are able to make your monthly payments on your credit cards, but the balances just don’t seem to
go anywhere, perhaps a Debt Management Plan (DMP) is right for you. You do not have to be late on
your payments to qualify for a DMP. But if you do qualify, you will be eligible for concessions from your
creditors such as lower interest rates. Depending upon your situation, you may also be making smaller
monthly payments than you currently are.
FCAA’s members are nonprofit credit counseling agencies. Their certified credit counselors speak with
individuals in all different financial situations. Yes, they do help people who are falling behind on their
credit card payments, but they also help people who just want to get out of debt as quickly as
possible. Sometimes they speak with people who quite simply just need to organize and simplify their
financial lives. Not sure where you fit? Fill out the FCAA’s Debt Decisioning Tool to help you get
If you think a DMP is right for you and you qualify, here’s how it works. You will make a monthly
payment to the credit counseling agency you are working with, who will in turn send a payment to each of
your creditors. You will also need to close all cards entered into your DMP.
There is an enrollment fee and a monthly fee for the DMP (all fees are regulated state laws). In a typical
situation the interest that you save by enrolling in a DMP will outweigh the fees you will pay. And,
unlike with a debt settlement plan, because you are repaying the full amount of your debt, there will be no
taxable consequences to enrolling.
However, depending upon the individual’s situation, some may see a small dip in their credit score when
this happens. Since the creditors continue to get a monthly payment, they will continue to report to the
credit bureaus your great payment history. This helps to level off the drop in one’s credit score and, in
some cases can even help improve it.
Could a DMP and nonprofit credit counseling be the right fit for you? Call the FCAA National Locator
Line at 1-800-450-1794 to speak with a certified credit counselor.