What Is a Debt Management Plan (Credit Counseling)?

A Debt Management Plan (DMP) is a debt relief strategy designed to help individuals pay off their debts over a period, usually ranging from three to five years. In a DMP, an agreement is made between the debtor and a credit counseling agency. The debtor commits to making a monthly payment to the agency, which then distributes the funds to the creditors.

The credit counseling agency works closely with the debtor to create a tailored plan that takes into account their income, expenses, and total debt. The agency also negotiates with creditors to lower interest rates, waive fees, and stop collection calls.

Once the plan is in place, the debtor makes one monthly payment to the agency, which handles the distribution of funds to creditors until all debts are cleared, typically within three to five years.