Can I remove an account from the debt management program?
The quick answer to both is yes.
The longer — and more realistic — answer is yes, but there are consequences for both of these actions.
Cancelling the Debt Management Plan: How, Why and Consequences
A debt management plan combines your available financial resources with concessions from your creditors, and calculates an affordable monthly payment that will eliminate your debt.
The plan is a voluntary agreement. You can cancel anytime, for any reason. At InCharge Debt Solutions, you can cancel the debt management program with a phone call, email, fax or letter.
You may consider cancellation if your financial circumstances change dramatically. You may walk into an unexpected windfall of cash through an inheritance or job promotion and feel like you can pay off the debt quickly. On the other hand, you might lose your job or face a huge bill for a home or car repair and decide you just can’t handle the monthly payments anymore.
Either way, you can cancel your debt management plan. A credit counselor may contact you to verify that this is in your best interests, but it is easy to get out of the agreement.
The problem with cancelling a debt management plan before you’re finished is that it creates (or recreates) the problems that got you in trouble. You still have credit card debt; you still need debt relief; and you likely will lose the concessions from creditors that gave you a chance to be debt free.
A debt management plan is built around those concessions, namely by reducing interest rates and fees on your credit cards so that you can lower monthly payments. Those concessions go away as soon you drop out.
In other words, the interest rate on your debt returns to its previous level, late fees are re-instituted, and your monthly payment increases. You are basically right back where you started.
Can I Remove an Account from My Debt Management Plan?
Yes, you can remove individual accounts from your debt management plan. To do so, call customer support and make the request.
The consequences for removing a credit card account from a debt management program are similar to those of cancelling a program, though possibly not as severe.
Credit counselors encourage you to put all your credit card accounts into the program. Credit cards are usually the source of trouble for people in debt management programs, and the time spent in a program is a chance to wean off of them.
Still, some people don’t think they can live without their favorite credit card and don’t want it included in the program. Not a problem. The good news is that most DMPs allow you to keep one credit card account open for emergency use only, so at least you’ll have one card in your wallet.
However, emergency use means an unexpected house/car repair or a costly medical situation. It doesn’t mean buying new clothes for the spring or purchasing concert tickets for a band you always wanted to see.
As for removing a credit card when you are already in a debt management program, that too can be done, but again, there will be consequences. You will not be able to use the card until the debt has been settled, and it’s likely the card company will increase the interest rate you pay on the card.
Alternatives to a Debt Management Program
Some of the choices you have for a fresh start financially include debt settlement, debt consolidation, and if the situation has reached extreme conditions, bankruptcy. Each of these programs has positive and negative aspects, particularly regarding impact on your credit score.
Debt settlement and particularly bankruptcy will cause some real damage to your credit score. This can make it difficult to qualify for home and auto loans.