Right now, many people find themselves with challenging debt problems. The pandemic, job losses, inflation, child care, and other reasons are causing economic hardships and contributing to a rise in credit card debt for a large portion of the U.S population.

62% of credit card holders may miss some or all of their monthly payments, according to a recent poll by CreditCards.com. Others are already behind on their accounts or are currently in collections. Consumers need to regain control of their financial future, which starts with getting out of credit card debt.

If you’re having trouble paying off debt on your own, a debt management program may be the solution you need.  The program combines all your bills into one affordable monthly payment and lowers your interest rates.

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What is a Debt Management Program?

A Debt Management Program or Debt Management Plan, often called a DMP, is a structured agreement between debtors (people who owe money on credit cards or other loans) and their creditors. The program reduces or eliminates interest rates and stops penalties. This program allows people to pay off their debt faster because they focus on paying off their balances instead of paying interest charges. The total monthly payment is often lower, too.

You enroll in the program through a nonprofit consumer credit counseling service.   At the end of the program, all the credit cards you included in the program will be paid in full. The process takes three to five years, on average, but varies depending on the amount of debt you have to pay off and your budget.

The facts about debt management programs

Average time to pay-off 36-60 payments
Amount of principal repaid 100% (paid in-full)
Average negotiated interest rates 0-11%
Total credit card payment reduction 30-50%
Average fees $49
Effect on credit Generally positive or neutral
Works best for Credit card debt still with the original creditor
Other types of debt you can include Debt collections
Medical bills
Payday loans
Unsecured personal loans
Credit card debt consolidation loans


How a nonprofit debt management plan works

Nonprofit consumer credit counseling agencies carefully consider debtors’ needs and abilities. They contact creditors to see what terms they will accept and facilitate payments. The process is done to benefit the consumer, who enjoys lower interest rates and no penalties. The consumer will now only make one payment per month to satisfy all of the creditors who agree.

Consumers can pay back the debt much faster with this method. The time frame is typically three to five years. After paying back the debt, you can re-establish credit or establish new credit on favorable terms.

Here is what the process looks like step-by-step:

  1. A certified credit counselor reviews your debt and budget in a free evaluation.
  2. You work together to find a monthly payment you can afford.
  3. Then the credit counseling team contacts your creditors to get the best terms possible.
  4. Your creditors must agree to accept payments through the program.
  5. They also agree to reduce or eliminate interest and stop penalties from being applied to your balance.
  6. You pay one monthly payment that covers all the debts you included in the program.
  7. You save on interest and have an exact timetable of when you’ll be debt-free.
  8. You graduate from the program better enabled and without most unsecured debt.

How does a debt management program work?

With a debt management program, credit counselors negotiate with your creditors to accept a new payment plan and lower interest rates. Interests range from zero percent up to about eleven percent depending on the creditor.

All of the debts are consolidated into one monthly payment that works with your budget.

The large reduction in interest enables you to pay off the debt faster and more money each month goes towards principal. Most people complete the debt management program in about three to five years.

Enrolling in the program usually doesn’t have any negative impact on your credit score as long as you keep up with the payments. In fact, many people with low credit scores at the start of the program usually see their credit improve by completion. Since your creditors agree to the payment plan, it helps you build a positive credit history as you pay off your debt.

The best way to find out if this solution will work for you is to speak with a certified credit counselor who will evaluate your finances. If a debt management program is your best option, they can help you enroll. Otherwise, they’ll let you know which solution you should pursue.

If you enroll in a debt management program, the credit card accounts you include will be frozen and you will not be able to use those cards. In many cases, you can also include medical debt and payday loans.

Debt management plans are a great way to help your family get out of debt and continue to reach your financial goals.

To get started, simply fill out our form or better yet, call us now, and we’ll match you with the best solution for your situation, for free. We are A- plus rated by the better business bureau and have helped thousands of people become financially stable.

So, don’t struggle any longer, give us a call. When life happens, we’re here for you.

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Try our Debt Management Program Calculator

Before choosing a debt management program, it’s strongly advised for consumers to see how long it will take to pay back debts using various debt relief programs. This debt management program comparison calculator shows how much a consumer can expect to pay with a DMP and how that compares to other solutions. The results are only estimates, and debtors should work with a certified credit counselor to jointly develop a plan of action.

You can compare four solutions by using our debt management Program Calculator.

Comparing debt management program pros and cons

For most people with credit card debt, a DMP will be a positive course of action—especially for those that have fair or bad credit. You’ll wind up being able to pay off the entire debt much quicker than you would on your own and start saving for emergencies and life goals. While you can’t use the program for taxes or student loans, you may be able to combine medical and other unsecured debt into the program.

Debt management plan pros

  • One payment a month.
  • Reduced interest rates.
  • Quick payment time.
  • Start saving again.
  • No more collection calls.
  • An exact timetable for paying off debt.
  • Build positive credit history.
  • Bring past-due accounts current faster (most creditors do this after 3 payments).

Debt management plan cons

  • Any credit cards enrolled in the program will be frozen.
  • Your credit cards will be closed as they get paid off.
  • Closed credit accounts can hurt your credit.
  • You can’t apply for new credit cards while you’re enrolled.
  • If creditors don’t agree to the program, those will still be separate bills.
  • You can’t include secured debts (mortgages/car loans), student loans, or back taxes.
  • No missing payments! If you miss any payments, the program could get canceled, although you can contact the credit counseling agency to work something out.

Other debts can be included in a non-profit debt management program

In this article, we’ve mostly talked about credit card debt. A DMP (debt management program) works exceptionally well with credit card debt that is still with the original creditors. It can also work with credit card debt in collections.

Additionally, you may be able to use a debt management program to take care of and consolidate any type of unsecured debt apart from student loans and taxes. Student loans are a unique type of loan and need specialized relief programs. Debt management programs can’t be used with “secured debts.” Secured debts include loans such as mortgages or auto loans.

As long as the debt collector agrees to be in your program you can include that debt in the DMP. It’s certainly not as good as if the debt were with the original creditor because debt collectors are prohibited from charging monthly interest. So, there is less for a credit counselor to negotiate on your behalf. You also will end up repaying collection accounts in full, where you may have been able to settle with the collector for a percentage of what you owe.

But if you are looking for simplicity, it still could work in your favor. You’ll still have only one payment per month. This alone will reduce financial stress and ensure you have all of your debt service paid on time and in full.

Medical debt can be costly. Collection agencies had around 140 billion in unpaid medical bills in 2020, and that might keep increasing. Medical collection bills are the largest source of unsecured debt that Americans owe, outside of student loans.

Medical debt can be included in a debt management program, even if they are in collections, as long as the collector or service provider agrees. Just as in the above case of credit card debt collections, you’ll lose the benefit of negotiating the interest rates. Medical bills have no interest rates.

With both medical debt in collections and credit cards in collections, you may want to consider debt settlement. Or you can call the original service provider directly to set up a settlement repayment plan.

It’s important to note that you cannot enroll in a debt management plan solely for medical collections, but if you have credit card debt then you may be able to include the medical collections in the same program.

Payday loans are some of the worst financial products a person can get involved in. Even using them responsibly gives you interest rates at close to 300%. Typically these “loans” target minority neighborhoods and economically disenfranchised people or anyone down on their luck at the moment.

Payday loans should be an absolute last resort for a loan. They are only for very short-term situations. For example, if you live paycheck to paycheck and your car breaks down before the next payday. This might be a solution, but they should be used with extreme caution and avoided if at all possible.

The main issue is that people rarely use payday loans as they are supposed to be used and start a cycle of borrowing from payday loan companies.

Still, if the payday loan companies agree, you can include them in a debt management program. However, if payday loans are the majority of what you owe, consider debt settlement instead. Or you could work out more favorable agreements with the loan companies, if possible.

Unsecured debt consolidation loans, meaning they don’t involve collateral like a house or car, can be included in a debt management program. This is great for those who want to solve credit card debt and other debt problems but haven’t been entirely successful.

That loan must be unsecured, and loans based on your home do not qualify. But if you took a personal loan to pay off debt, you can enroll in a DMP. You can even consolidate your personal loan along with any additional credit card debts in a non-profit debt management program.

It’s important to note that you cannot include debt consolidation loans for student debt, even though they are unsecured. Student loans are a specialized type of debt, so they usually require a specialized solution.

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The cost of a debt management program

With any money management service, you should know what the costs are going to be and how those costs compare to other solutions. Since debt management programs are run by nonprofit credit counseling agencies, the fees are low compared to other solutions.

A debt management program has a one-time setup fee that you pay with your first program payment. Then there is a monthly administration fee every month thereafter.

There is a nationwide cap on debt management program fees. It is currently $79 monthly; however, the average person pays about $49 per month. You only pay once you are enrolled. To make the process easier, all fees are rolled into the program payments. But you will know exactly what those fees are before you enroll.

Consumer credit counseling agencies are 501(c)3 nonprofit organizations. That means they’re not in the business of making money off your financial hardship. Instead, they are primarily funded by grants from credit card companies. As a result, the cost of a debt management program is relatively low compared to other solutions, such as debt settlement.

It still does take some money to run and administer each debt management program. Credit counselors get a salary, and there is overhead and equipment. Fees can be reduced in cases of exceptional financial hardship and waved for certain groups of people.

For example, you may have lower fees if you’re a military Service Member or Veteran. Some credit counseling agencies reduce fees for people living in a declared disaster area for things like hurricanes, fires, or floods. The idea is that people often take on credit card debt following a natural disaster, so they may face severe financial hardship as they recover.

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Want to see if you qualify for a debt management program? Talk to a certified credit counselor now for a free evaluation.

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The effects of a non-profit debt management program on your credit

In general, debt management programs tend to have either a neutral or possibly a positive effect on your credit score, but it depends on what your score is when you start. Not using a debt management program might be the worst thing for your credit if you cannot pay off all the credit cards or make your minimum monthly payments.

A debt management program can often be good for your credit score because you will make payments on time on all the accounts included in the program. On-time payments account for 35% of your credit score. Since most creditors agree to bring past-due accounts current after three payments, you can also stop damage from missed payments on delinquent accounts much faster.

It’s often the case that you can leave one credit card out of the program to keep it active and open while you pay off your other cards. If you can keep the good habits from the program, keep a low balance and pay on time, this will positively affect your credit score.

At the end of the program, your frozen cards will be closed. This may affect your credit score negatively, but it also has a good side. When you close accounts, your score goes down because one aspect of credit ratings is how long you’ve had credit. With that being said, even though you have some closed accounts when your credit record says “paid in full,” your future creditors will be able to trust you, and this is positive for your credit report.

As long as you pay off your balances on time and in full, which is what the debt management program does, the credit bureaus will positively view your credit habits. But, if you miss a payment, then you will damage your credit history. Be sure that you will be able to make payments as agreed before you start this program. Take some of the extra money you should have monthly because of lower payments and create a savings account for emergencies and other life goals.

It’s crucial to note that while your credit counselor is negotiating with your creditors, you should continue to make on-time minimum payments, or your credit rating will suffer.

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The differences between debt management and debt settlement

Debt management and debt settlement are very similar in some respects. Both are designed to get you debt-free, and both will allow you to enjoy paying down your debt with just one payment a month. Beyond those two aspects, the programs are very different.

A nonprofit debt management program will help you pay ALL of what you owe with lower interest rates and a single monthly schedule. You continue to pay your debts while the credit counseling agency works out terms with your creditors. Your entire debt gets paid and not charged off, which means you won’t damage your credit long term.

The program can be used to pay off debts that are current, behind and in collections. Current debt will stay current and delinquent debts will be brought current, usually within three payments on the program.

Debt Settlement is different. You only pay a portion of the balance you owe. A debt settlement company creates an escrow account where you set aside money that will be used to make settlement offers. But your creditors are not paid every month. The debt settlement company only contacts your creditors once there is enough money in your account to make settlement offers. Then the creditor is paid out of that account and the debt settlement company takes their fees.

Debt settlement fees are much higher than those with a debt management program. Companies will either take a percentage of the original debt owed or a percentage of the amount settled, depending on the company’s fee structure. Fees can be up to 20-25% of the amount enrolled in the program or the amount settled. You should receive a detailed summary of how the fee structure works before you sign up.

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What you should consider before you start a debt management program

Debt.com’s founder, Howard Dvorkin, is a supporter of nonprofit debt management programs. He’s continually advocated for debt management programs as a way for consumers to get out of debt faster.  But he wants people who are thinking of entering into a debt management program to understand it fully.

“Often, people get into serious trouble with credit card debt because they’ve become credit-dependent,” Dvorkin explains. “You get accustomed to pulling out the plastic anytime you’re short on cash. You come to rely on credit cards to cover monthly expenses and use them anytime you have an emergency. If you don’t break this credit dependence, then it won’t be long before you face credit card debt problems again.”

Debt management programs make you stop using credit cards. The credit cards are frozen during the program and can’t be used. When the program is over, the cards are closed.

Mr. Dvorkin continues, “You need to be aware, that if you miss even a single payment, the program could end. This would be the second commitment you’ve made to your creditors that wasn’t honored. Those in this program need to be dedicated to their goal of becoming debt-free.”

Most of the time, however, because you are paying less per month on your total debt, you will also be highly encouraged to set up an emergency fund that could be used to cover a month or two if you are otherwise unable to make payments.

It’s possible that one or two creditors and some collection companies will not accept the offers from the credit counseling. Mr. Dvorkin explains, “So, you may have to pay more than one monthly bill. If that is the case, your credit counseling agency will figure the difference in your monthly budget.”

With a good debt management program, not only will you get out of credit card debt and be on the way to living debt-free, but you’ll also learn the skills and techniques to stay out of debt.

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Debt management program FAQ

Q:Is a debt management program a debt consolidation loan?

A: No. While a debt management program is a form of debt consolidation, it is not a loan. You are not obtaining new financing; you are simply setting up a structured repayment plan that will work for your budget. As you and your credit counselor go over your debts and contact your credit card companies, you will not take out any loans; you will repay what you already owe.

Q:Can you get student loans when you’re in a debt management program?

A: Yes. You can get student loans while you are enrolled in a debt management program. For student loans, this includes both federal loans that you apply for through FAFSA and private student loans from private lenders.

In addition, these loans don’t need to be used for your education. For example, parents working through a debt management program can apply for loans to fund their children’s education. Parents can get PLUS loans through the Federal Direct lending program and student loans from private lenders.


Q:Can you get a mortgage when you’re in a debt management program?

A: Yes. You can get a mortgage while you are enrolled in a debt management program. As long as your credit score and income meet the requirements, including your overall debt-to-income ratio, and you are paying your debt management program on time, lenders will see you as a responsible candidate for a loan. Many people get into a debt management program because they have a goal of purchasing a home.

Q:Can you get a car loan when you’re in a debt management program?

A: Yes. You can get a car loan, again, as long as your credit and income match the requirements needed by the financing company. As with a mortgage, if lenders see you are making all your payments on time, you’ll likely have a better chance to get car financing. When you are in the program, lenders may charge higher interest rates.

Q:Can you get a new credit card when you’re in a debt management program?

A: No. Your credit cards are frozen during the program, and you cannot get new cards during the program. Many programs will allow you to keep one card open during the process. After the program, if you wish, you can get new credit cards.

Q:Can I get out of a debt management program?

A: Yes. The program is entirely voluntary. It’s your choice to enter a debt management program, and you are free to leave whenever you wish. This can be accomplished by paying off your debts early – which is the best way. Or you can leave the program while still owing the debt. However, your creditors will likely go back to your original interest rates and penalties. Your original due dates will return as well. So, we would advise you NOT to take that course of action. Otherwise, you’ll face higher interest charges and overall costs.

Q:How much do I need to make to qualify for a debt management program?

A: There is no minimum. Typically the baseline is $5,000. But you must be able and willing to pay your monthly payment. If you are unable to pay any of your debts, you may have to consider other options.

Q:Do debt management programs close all accounts?

A: . Yes, your creditors will “freeze” any accounts you’ve put in the program and close those accounts once they are paid off. They will be recorded as paid in full on your credit report – a very positive thing to have on a credit report. Some DMPs allow you to keep one credit card open for any emergencies. This would not be a part of your monthly payment. This helps your credit file as long as you are on time with the payments and keep low balances.

Q:What happens to my secured credit cards with a DMP?

A: A “secured credit card” is a credit card with a pre-determined security deposit equal to the card’s credit limit in a creditors institution. In other words, if you have a secured credit card with a $1000 limit, you’ll also have $1,000 in their institution. There is typically no need for a debt management program with these types of cards, as the card issuer can close the account at any time – especially if you are late – and use your deposit to pay it off.

Q:Do debt management programs work?

A: Yes, they do, but it’s not for everyone, and you have to be an active participant. It works best with consumers who have over $5,000 or more in credit card debt, still with the original creditor.

If you have medical bills, payday loans, and debt collections, these can also be included. But the program is not as beneficial for these types of debt.

It’s worth noting that only about one out of every twelve borrowers that contact a credit counseling agency end up enrolling in a debt management program. For the others, credit counselors usually recommend alternative solutions, such as consolidation loans or settlements. 


Q:Does Capital One participate with debt management programs?

A: Yes. In fact, almost all major creditors participate in debt management programs. This includes:

  • American Express
  • Bank of America
  • Capital One
  • Chase
  • Citibank
  • US Bank
  • Discover
  • Wells Fargo

Most major retailers that offer store credit cards also participate in debt management programs. This includes:

  • Amazon
  • Best Buy
  • Costco
  • Fingerhut
  • Gap
  • Home Depot
  • Lowe’s
  • JC Penny
  • Kohls
  • Macy’s
  • Nordstrom
  • Old Navy
  • Sears
  • Walmart

Q:What happens if I am in a debt management program, then declare bankruptcy?

A: : If you decide to declare bankruptcy while enrolled in a debt management program, the program would end. That’s because the bankruptcy court would be responsible for determining how much of your debt gets repaid before final discharge, as well as how that debt would get repaid. As a result, your debt management program would end, and your original creditors would enter bankruptcy negotiation through the court.

Just keep in mind that if you’re keeping up with your debt management program payments, there’s little reason to declare bankruptcy. You have a repayment plan set up with all your creditors. As long as you stick to the repayment plan, you should be able to get out of debt without damaging your credit. By contrast, bankruptcy will hurt your credit. What’s more, if you file Chapter 13, you’ll still be subject to making monthly payments on the court-ordered repayment plan, which will also last 3-5 years.

So, unless you see the writing on the wall that you won’t be able to keep up with your payments, stick with your DMP. You’ll protect assets from liquidation, keep the courts out of your finances, and start in a strong position credit-wise once you’ve finished paying off your debt.


Q:What if I can’t pay my debt management program?

A: Call your credit counselor immediately and tell them that you’re having trouble making the payment. If it’s a one-time slip-up, then they should be able to contact your creditors to let them know that they’re already working with you to keep your DMP on track. As long as you don’t miss the payment entirely (i.e. pay late by more than 30 days), they should be able to help you make arrangements.

Even if you are going to be more than 30 days late, they may still be able to help you stay enrolled. They will need to contact your creditors to make sure they’re willing to let you stay in the program. As long as your creditors agree, then you can continue making payments on your DMP.

What you don’t want to do is treat your credit counseling team like debt collectors and start dodging their calls. If they don’t hear from you and you haven’t made a payment, they can’t tell your creditors anything useful. Your creditors will assume you dropped out and the credit counselors won’t be able to tell them anything to the contrary. It’s more likely that you won’t be allowed to continue the program.

Always remember that consumer credit counselors are there to be your ally and your advocate. They’re there to help you make arrangements if you’re struggling to keep up with your payments. But they can only work with you if you’re willing to talk to them.


Don’t waste another sleepless night worrying about your credit card debt. Talk to a certified credit counselor to find the right solution for your situation today.

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Article last modified on October 8, 2021. Published by Debt.com, LLC