Crush Debt Fast with Debt Management Plans
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When couples face mounting debt, navigating repayment together can feel overwhelming. But a Debt Management Plan (DMP)—offered by nonprofit credit counselors—can be a powerful tool to reduce interest, simplify payments, and regain financial control. Here’s an in-depth guide to DMPs featuring pros, cons, key comparisons, costs, and how to choose the right path as a couple.
What is a Debt Management Plan (DMP)
A DMP is not a loan—it’s a structured repayment plan managed by a nonprofit credit counselor to help you crush debt fast. Once your creditors approve your entry into a DMP, your individual monthly debt payments are consolidated into one and interest rates are cut in addition to some fees being waived. One of the greatest benefits of this plan is that it helps you, the client, to steadily pay off unsecured debt (debt not backed by collateral), within 3–5 years.
What Types of Debt are Included in a DMP
While there are many types of debt that can be included in a debt management plan, there are a few that cannot be included in the plan. Below is a breakdown of both categories.
✅ Types of Debt Included in a Debt Management Plan:
Unsecured Debt
- Credit Card Debt
- This is the most common type of debt in a DMP.
- Includes store credit cards and major cards like Visa, MasterCard, Discover, etc.
- Medical Bills
- Hospital and doctor bills that are not in collections or can be negotiated into the plan.
- Personal Loans
- Loans that weren’t backed by collateral (like a car or home).
- Must be with creditors who are willing to work with the DMP provider.
- Collections Accounts
- Some third-party collection agencies may agree to participate, but not all.
- Past-Due Utility Bills (Sometimes)
- If the utility provider is willing to negotiate and participate, they may be included.
- Department Store and Retail Cards
- Cards from stores like Target, Macy’s, etc. are generally eligible.
- Old Cell Phone Bills or Gym Memberships
- As long as they are unsecured and the creditor agrees.
🚫 Types of Debt NOT Included in a DMP:
Secured Debt
- Examples: Mortgage loans, auto loans, title loans
- These debts are backed by assets, and DMPs don’t restructure them.
- Student Loans (Usually)
- Federal or private student loans are typically excluded. However, credit counselors may help you explore repayment options outside of a DMP.
- Tax Debt
- IRS and state tax debts are not typically included.
- You’ll need to make separate arrangements for these.
- Business Loans
- Unless they are personally guaranteed and unsecured, business debts are generally excluded.
- Legal Judgments or Court-Ordered Debts
- Including child support, alimony, and restitution orders.
To get a tailored plan, it’s best to meet with a nonprofit credit counseling agency, who can review your full financial picture and determine what can and can’t be included in your specific DMP.
Quick Summary Chart
| Debt Type | Included in DMP? |
|---|---|
| Credit Cards | ✅ Yes |
| Medical Bills | ✅ Yes |
| Personal Loans (Unsecured) | ✅ Yes |
| Collection Accounts | ✅ Sometimes |
| Store Credit Cards | ✅ Yes |
| Student Loans | ❌ No |
| Auto Loans | ❌ No |
| Mortgages | ❌ No |
| Tax Debt | ❌ No |
| Court-Ordered Payments | ❌ No |
When to Consider a Debt Management Plan
Now that you have a better understanding of what can and can’t be included in the DMP, now it’s time to understand what the ideal situations are that qualify for this type of program.
✅ Ideal Situations for a DMP
- High-Interest Credit Card Debt
- If most of your debt is unsecured (e.g. credit cards, medical bills), and you’re only making minimum payments, a DMP can help lower interest rates (often to 6% or less) and make repayment more manageable.
- Struggling to Keep Up with Payments
- If you’re consistently behind on bills, facing late fees, or experiencing creditor calls, a DMP helps consolidate multiple payments into one monthly payment.
- You Have Reliable Income
- You need steady income to commit to a DMP since it requires a monthly payment over 3–5 years. It’s not for people who are completely without income.
- You Don’t Qualify for Debt Consolidation Loans
- If your credit score is too low or you’ve been denied consolidation loans, a DMP can be a non-credit-dependent alternative since nonprofits focus on affordability, not creditworthiness.
- You Want Professional Help but Not Bankruptcy
- DMPs are a middle-ground option between DIY budgeting and bankruptcy. They offer structured support without the severe long-term impact of bankruptcy.
- You’re Committed to Avoiding More Debt
- DMPs require you to close or stop using credit cards while in the program. If you’re ready to change spending habits and stay debt-free, a DMP supports that goal.
🚫 When Not to Use a DMP
- Your debt is mostly secured (mortgage, auto loan).
- You can pay off your debt within 12–18 months using DIY strategies like the Debt Avalanche or Snowball.
- You have no income or can’t meet the monthly payment requirement.
- You’re dealing with student loans or tax debt, which are not eligible under most DMPs.
- You are not ready to stop using the credit cards you want to pay off under a DMP.
What are the Pros and Cons of Debt Management Plans
Pros:
- Lower interest rates and waived fees – saving money and speeding up payoff
- Single monthly payment – simplifies finances and reduces stress.
- Stops collection calls – once enrolled, creditors typically cease calls.
- Improved credit over time – clients often gain about 84 credit score points post-completion.
Cons:
- Close or limit use of credit cards – some accounts must be closed during the plan.
- Fees required – although very low, setup and monthly service charges do apply.
- Strict payment discipline – missing payments may remove you from the plan.
- Only covers unsecured debt – car loans, mortgages, and student loans are excluded.
How Much Does a Debt Management Plan Cost
The typical costs for Debt Management Plans (DMPs) are usually affordable and regulated, especially when you work with a nonprofit credit counseling agency. However; they do vary depending upon the agency you use. Here’s a breakdown of what you can expect:
1. Initial Setup Fee
- Average: $25–$75 (one-time)
- Maximum Allowed: Usually capped around $75, depending on state laws.
- What it covers: Administration costs, account setup, creditor communication.
2. Monthly Maintenance Fee
- Average: $20–$50 per month
- Maximum Allowed: Typically capped at $50, but varies by state and debt amount.
- What it covers: Ongoing account management, customer support, and payment processing.
Note: These fees are often waived or reduced based on your income or financial hardship. Nonprofits are required to ensure fees do not cause undue financial strain.
Included Services (Often Covered by the Fees)
- A personalized budget and financial plan
- Negotiations with creditors to:
- Reduce interest rates (often to 6% or less)
- Waive late fees or penalties
- Stop collection calls
- One monthly consolidated payment distributed to creditors
- Ongoing financial education and counseling support
Summary Chart
| Fee Type | Typical Cost | Notes |
|---|---|---|
| Setup Fee | $25–$75 (one-time) | May be waived for low-income clients |
| Monthly Fee | $20–$50 | Based on debt level and state caps |
| Total Monthly Cost | $0–$50 | Always ask about waivers or discounts |
How Much Can You Save With a Debt Management Plan
So, you might be wondering if a debt management plan is even worth it and more specifically how much money you will actually save by enrolling in a DMP. Well, according to Experian you can save a lot! The amount of interest saved is enough to take a really nice family vacation or two! Here’s a detailed breakdown of how much interest is paid with and without a DMP.
How to Find the Right Nonprofit Credit Counselor
By using a reputable nonprofit agency, DMP costs are kept low and transparent — making this one of the most accessible and trustworthy tools to regain control of unsecured debt. Do your research and then consider contacting the nonprofit agencies mentioned below to avoid for-profit predatory debt relief firms which often mask themselves as credit counseling agencies who:
- Charge High upfront fees with promises of “erasing your debt fast.”
- Use Pressure tactics to enroll immediately.
- Guarantee debt forgiveness which is rare and often illegal.
Instead, seek help from legitimate nonprofit, accredited agencies:
- National Foundation for Credit Counseling (NFCC) – longest-serving nonprofit providing financial counseling services to individuals and families.
- Financial Counseling Association of America (FCAA) – professional membership organization for credit counseling agencies.
- Member agencies like GreenPath, Cambridge Credit, Money Management International, Apprisen, LSS Financial Counseling etc., offer free budgets and fee-based DMPs.
How to Choose the Right Debt Management Plan
With so many predatory debt relief firms out there, it’s important to not only choose the right agency, but it’s important to take precaution when choosing the right debt management plan. Here are a few strategies you can use to help you.
- Seek free consultation – reputable nonprofits offer it.
- Check accreditation – NFCC or FCAA membership is crucial.
- Ask if the organization is a certified nonprofit.
- Ask the agency about their completion rate for their DMPs.
- Ask about counselor pay structure – avoid upsell motivated agencies.
- Are fees clearly disclosed in writing?
- Can fees be waived or reduced if I can’t afford them?
- What exact services are covered by the monthly fee?
- Pre-review fees – get a full breakdown before enrolling.
- Confirm eligibility – income and debt types qualify.
- Have a Money Date – this ensures that you and your spouse are on the same page about moving forward with the debt management plan.
How Successful are Clients Who Use DMPs
Industry-wide completion success ranges from 55–70% depending on interest rates according to Debt.org. However, based on data collected by Experian, Money Management International (MMI), a national nonprofit credit counseling agency, stated that about 24% of consumers who work with one of their credit counselors choose to enroll in a DMP. And of that amount, 76% of the clients who started a DMP with MMI completed their debt management plan. GreenPath, another national nonprofit credit counseling agency, found that 59% of the DMPs their clients closed in 2022 were successfully paid in full. So, for couples committed to following a plan, DMPs offer real hope.
Final Takeaways
If you’re a couple drowning in credit card debt, unsecured loans, or mounting fees, a Debt Management Plan can be a lifeline—it offers structured repayment, interest reduction, and professional support. With a completion rate over 50% and credit score improvements of ~84 points, DMPs can turn financial stress into triumph. Choose the right path, make decisions as a couple, and take back control of your finances—together.
