What are Debt Management Programs and How Do They Work?

Debt management programs, sometimes called DMPs, are agreed-upon plans between a creditor, debtor, and third-party credit counseling agency to help the debtor reduce their outstanding, unsecured debt—typically credit card debt—usually over a payoff period of about five years.^1,2 Though somewhat similar to debt settlement or debt relief, debt management programs are managed by non-profit credit counseling agencies, whereas debt settlement companies are often for-profit.³

When you enroll in a debt management program, the third-party credit counseling agency will work with you to combine several unsecured debts into one manageable monthly payment.² Unlike debt consolidation, in which combined debts are rolled up into one personal loan,⁴ debts remain separate in a debt management program but are handled by the credit counseling agency (see more below, in How Do Debt Management Programs Work?).¹

The credit counseling agency might also try to get creditors to lower your monthly payments, reduce interest rates, or waive certain fees.¹

Debt management programs do not include secured debts like auto loans or mortgages.¹

Find a trustworthy credit counselor. Debt management programs can be pretty straightforward once you find a dependable credit counseling agency that understands your financial situation. But finding a reputable credit counselor can be tricky. Fortunately, the U.S. Department of Justice provides a state-by-state list of approved credit counseling agencies.

Once you’ve found a trustworthy credit counselor, they’ll help you evaluate your financial situation.¹ They might start by helping you make a budget.⁵ They might also ask you to close your credit card accounts to safeguard against accruing more debt while enrolled in the debt management program.²

Establish your debt management plan. Your credit counselor might then work with your creditors to lower your monthly payment(s), lower interest rates, or waive certain fees, like late fees or other penalties.¹ If your creditors agree to the proposed debt management plan, your credit counseling organization will change how you pay your bills. Instead of making standard separate monthly payments to each creditor, you’ll make one combined monthly payment to your credit counselor.² The credit counselor will then pay your creditors on your behalf.

But take note: Even though most credit counseling agencies are non-profit, you may have to pay a monthly fee of about $30-$100 for their services.²

Credit counseling agencies can do more than help you develop and follow a debt management plan. Since counselors are typically certified and trained in areas relating to consumer credit, debt management, and budgeting, they may be able to help you:⁹

Despite the possibility of a fee, mentioned above, initial non-profit credit counseling services may be offered free of charge, regardless of whether or not you choose to enroll in a debt management program.²