The essentials
- A debt management plan (DMP) is arranged through a nonprofit credit counseling agency.
- The agency asks your creditors to lower interest rates or waive fees, then you make one monthly payment to the agency.
- You repay the full balance, usually over three to five years.
- Enrolled credit card accounts are usually closed, but the credit impact is far milder than settlement.
In this article
DMP at a glance
- Who runs it: nonprofit credit counseling agencies
- What you pay: the full balance, often at a lower rate
- Fees: usually small setup and monthly fees, limited by many states
- Typical length: three to five years
Based on CFPB and FTC guidance on credit counseling. Fees and terms vary by agency and state.
A debt management plan is often the best fit for people who can afford to repay what they owe, just not at 22% interest. Many people have never heard of it because it is not heavily advertised.
Here is how a DMP works, what it costs, and how to find a reputable counselor.
How a debt management plan works
- You have a free or low-cost counseling session to review income, expenses and debts.
- The counselor proposes a plan and contacts your creditors.
- Creditors that agree may lower your interest rate or waive late fees.
- You make one monthly payment to the agency, which pays each creditor.
- You stop using the enrolled cards, and most are closed.
- The plan ends when the balances are paid in full.
Debt management plan vs debt settlement
Debt management plan
- You repay the full balance
- Interest rates often drop
- Accounts stay current if you pay on time
- Milder credit impact
Debt settlement
- You pay less than you owe
- You usually stop paying creditors first
- Late fees and collections are likely
- Severe credit damage and possible taxes
Compare debt management and other options
SponsoredWhat a DMP can do to your payment
Priya's $15,000 across four cards
Priya pays about 24% interest across four cards. Her counselor gets most creditors to cut rates to around 8%.
Her single monthly payment now pays off the balance in about four years, and she pays thousands less in interest than she would have at 24%.
Illustrative example. Names and numbers are made up to show how it works.
Results depend on your creditors. Not every creditor joins every plan.
Find debt help options near you
Debt relief rules and programs vary by state. Add your ZIP code to see options that serve your area. Looking is free and commits you to nothing.
How to choose a credit counseling agency
Look for an agency that:
Your state attorney general or consumer protection office can tell you whether complaints have been filed against an agency.
Frequently asked questions
Does a debt management plan hurt your credit?
It has a much smaller effect than settlement or bankruptcy. Closing cards can lower your score at first, but on-time payments help over time.
How much does a debt management plan cost?
Agencies usually charge a small setup fee and a monthly fee. Many states cap these fees, and some agencies waive them for hardship.
Can I leave a debt management plan?
Yes, you can stop at any time, but creditors may restore the original interest rates.
What debts can go in a DMP?
Mostly unsecured debts such as credit cards. Mortgages, car loans and federal student loans usually are not included.
See debt help options for your situation
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