If you are behind are your payments and your creditors keep calling, you may need a debt management plan. If you are considering bankruptcy, a new law requires that you obtain credit counseling before you file for bankruptcy. Credit counseling often includes a debt management plan. What exactly is a debt management plan? People who use a debt management plan (DMP) send a prearranged amount of money each month to a credit counseling organization. The counseling service uses this money to pay the individuals credit card bills, student loans, medical bills and any other unsecured debts. Home mortgages and car payments are not unsecured debts; individuals must continue to make these payments or risk foreclosure or repossession.

Can You Create Your Own Debt Management Plan?

Credit counseling organizations are able to negotiate with your creditors to possibly reduce your interest rates, stop late fees, over the limit fees and stop harassing phone calls. This is not debt negotiation, the service offered by some for-profit counseling services, which is expensive and is listed as a charge off on your credit report for seven years. Most creditors will not negotiate with individuals unless they are customers in good standing, so while you can create your own plan to pay off your high interest credit cards, control spending and perhaps avoid the necessity for a DMP, once you are in the situation described at the beginning of this article, you probably need help.

Choosing a Credit Counseling Service

Advertised on the internet, the TV, radio and in print ads, some credit counseling organizations are disreputable, have been sued by the Federal Trade Commission, have gone out of business, have overcharged consumers, misrepresented themselves as non-profits and pocketed money from consumers meant to pay off their debt. The best source of information for a debt management plan is the National Foundation for Credit Counseling. This site will help you find a member agency in your area, most of them known as Consumer Credit Counseling Services or CCCS. CCCS will send 100% of the money you deposit with them for the purpose of debt repayment to your creditors; they will help you pay off your debt in three to five years and they will not charge exorbitant fees. In fact, for those who are considering bankruptcy and required to obtain credit counseling, the U.S. Trustee Program (the organization within the Department of Justice that administers bankruptcy cases) requires that the CCCS waive fees for those who cannot afford to pay. The website of the U.S. Trustee Program lists all government approved credit counseling organizations and is another source of good information for those with excessive debt.