A Debt Management Plan, also known in its abbreviated terms as a DMP, is a plan of action whereby you agree with your creditors to make payments to clear the debts you owe them but at a reduced rate.
The idea of a DMP is to relieve some of the pressure when encountering financial difficulties whereby you continue to make some form of contribution to the money you owe until your economic situation improves. This allows you to then begin paying the normal recommended monthly amounts or even paying them off altogether.
Do You Think You Need a Debt Management Plan?
DMP’s are usually recommended when people begin to encounter continued financial difficulty:
Your unsecured debts total exceeds $4,500.
You are struggling to keep up with even the minimum of monthly payments on these debts and beginning to fall behind.
You do not want to face the prospect of losing any of your assets to your creditors.
How to Arrange a Debt Management Plan
If you have decided that a DMP would be beneficial to your current situation, there are two methods that you can utilize to begin a DMP. Your first choice is to contact all your creditors yourself and directly inform them of your predicament. Tell them about your proposed DMP plan and set up in place a reduced payment.
Alternatively, if you would prefer someone with the financial knowledge of debt, you can use a debt management company who will do all of this for you and deal with the creditors on your behalf.
The Further Advantages of a DMP
As well as keeping your creditors in the loop and with that all-important payment to show your dedication to your payment plan, a DMP will not require any additional handling fees or set up costs whether you choose to handle the program yourself or use a DMP company. Therefore, this means that every single penny that you make towards the plan goes directly to your creditors and nowhere else, ensuring you reach the maximum payment you can afford in total to every one of the creditors that you currently owe.