Joint Debt Management Plans

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Having debt is stressful. When debt is shared with a partner, it can double the stress and put a marriage or partnership in jeopardy.

On the flip side, when spouses or life partners unite to tackle their debt together through a debt management plan, it can ease the stress and strengthen the partner.

A joint debt management plan pays down your unsecured debt (mostly credit cards) in 3-5 years. The couple combines their income to work toward paying down their combined debt. Both sides must sign the agreement.

A debt management program is not a loan or debt settlement to pay less than what’s owed.

It’s not the best option for all couples. Household income must be enough to make the monthly debt payment as well as the usual bills for housing, food, utilities, etc.

If you’re looking at a joint debt management plan to help you get afloat financially, it will matter how you classify your debt and you should research the program to make sure it’s right for your situation.

“Consumers should be cautious about enrolling in a joint debt management program if they are not married and/or not associated with the account at origination or anytime thereafter,” Bruce McClary, vice-president of marketing at the National Federation of Credit Counseling, said.

What Is a Joint Debt Management Program?

A joint debt management program is a plan for a couple to pay off their debt with help from a nonprofit credit counseling agency. The program takes 3-5 years to complete.

Debt management programs are for unsecured debt. Most people who enter into debt management programs – about 89% – say they do it because of credit card debt.

Joint debt management programs can be entered into by married couples as well as those who are not married but share a household. How much money each partner owes or brings into the household doesn’t matter. As with all debt management programs, credit scores don’t matter either.

The idea is to put together a single plan to eliminate both parties’ debt. If both names are on credit and other qualifying accounts, both parties must enroll and sign the debt management plan agreement. If only one person’s name is on an account or accounts, the couple can still sign up for a joint debt management program, but both must sign the agreement.

A member of a couple can also enroll in the debt management program as an individual, but only to pay down debt that is in their name only, not joint accounts.

How Does a Joint Debt Management Program Work?

Debt management plans start with a phone call to a counselor at a nonprofit credit counseling agency, like InCharge Debt Solutions.

The steps to enroll in a joint debt management program are:

  • Participate in a 30-60 minute free credit counseling session, in which the counselor reviews the couple’s income and expenses to determine how much disposable income is available to pay off debt.
  • Both partners agree to allow their credit report to be pulled to verify personal information and debt owed.
  • If the couple’s budget can accommodate a monthly payment on debts, the counselor will suggest a debt management program as a relief solution. The monthly payment is determined by the amount of disposable income the couple has, as well as creditor guidelines based on how much is owed. A monthly administrative fee is also included.
  • The couple officially agrees to enter into the joint debt management plan. The credit counseling agency sends them a contract to sign.
  • The nonprofit credit counseling agency works with creditors to lower interest rates and waive fees on the couple’s unsecured debts (usually credit cards).
  • The couple makes one monthly payment to the credit counseling agency; the agency pays creditors.
  • If the couple sticks with the plan, their debt can be eliminated in 3-5 years.

Disposable income is the amount of household money left each month after paying necessary expenses — food, rent, utilities, transportation, insurance. For example, if necessary monthly expenses add up to $4,300 and the household monthly income is $5,000, there is $700 of disposable income to put toward eliminating debt.

It is important that the couple understand that both parties are accepting responsibility for all of the debt that will be included in the plan, and both agree to the terms and conditions of a debt management program.

Typically, this is done during a phone call with the credit counseling agency. If the timing for that is a problem, each partner can call and go through the step-by-step process on their own, but they must make the credit counselor aware that they are enrolling in a joint debt management program. The session can also be done online, together, or separately. If done separately, again, the partners must make it clear they are signing up for a joint agreement. The couple will both officially sign the agreement sent to them by the nonprofit credit counseling agency.

Things to Consider with Joint Debt Management Plans

There are several things for a couple to consider before entering into a joint debt management program.

Everyone’s financial situation is different, so some of these factors may mean nothing to you as a couple. Others may be deal-breakers.

Things to consider before entering into a joint debt management plan are:

  • Partnerships with separate finances will have to change how they manage money.
  • A joint DMP will combine individual credit and debt accounts, meaning partners are sharing responsibility for the other partner’s debt.
  • Both partners must officially agree to enter into a joint debt management plan.
  • Debt management plans do not include student, auto, or mortgage loans; medical debt; non-credit collections items; or other secured debt.
  • Your household income must be enough to afford a monthly payment that will pay off your unsecured debt in 3-5 years.
  • Both partners must commit to budgeting and cutting back spending while they pay down debt.

Having separate finances or separate credit accounts doesn’t mean you can’t have a joint debt management plan; it just means that you must change how you handle finances. Sharing finances and taking responsibility for the other partner’s debt may be a major change in mindset for some people.

Think hard about commitment, as a couple, and what it means for the way you handle money. If you bow out of a plan still owing money to creditors, the agreement forged by the credit counseling agency and the creditors will no longer be in place, and higher interest rates and fees will likely apply.

Advantages of a Joint Debt Management Plan

If you as a couple agree that a debt management program is a good option, there are advantages both immediately and over the long haul:

  • One monthly payment. No more juggling multiple payments between two people every month.
  • Consumers who enroll in debt management plans see a significant increase in their credit scores as on-time payments are made, and their debt gets paid down.
  • Studies have found that those who enroll in a debt management program are more successful at paying off credit card debt than those who don’t.
  • Participants learn to be less dependent on credit cards.
  • Paying off credit card debt will make it easier to handle payments that aren’t covered by the plan, like student loans, auto loans and rent.
  • Nonprofit credit agencies offer free financial tools and resources. Couples who take advantage of them can learn how to manage money better, live on a budget, and even how to communicate about money and spending.

What Happens if You and Your Partner Split Up?

A joint debt management plan will likely be canceled if you and your partner split up. This is because you are no longer sharing finances. If your income and debt can’t be combined, a joint debt management plan can’t work.

Generally, in a legal separation or divorce, debt in your name stays with you and your partner’s stays with them. If that separation becomes a divorce, or goes to mediation, the court will decide how debt held jointly will be paid. It’s even trickier if you live in a community property state. Debt incurred after you got together may be shared by both of you, depending on what state you live in and the type of debt. The court will sort that out.

But the bottom line is, once there’s no partnership, there can be no joint debt management plan.

If you still want to tackle your debt once the dust settles, you can enter into a debt management plan as an individual. The fact that you were in one that didn’t work out won’t be a factor.

Is a Joint Debt Management Plan the Best Option?

It can be difficult for two people to get on the same page as they’re struggling to get out of debt.

The National Foundation for Credit Counseling in its most recent financial literacy survey, found that while 55% of responders are confident about talking to their spouse or partner about personal finances, and 91% say they’re honest about finances, only 83% think their partner is. Yet there’s a deep divide among couples:

  • 35% say that the way they and their spouse or partner manage their money or finances often leads to conflict.
  • 33% say they sometimes hide their purchases or spending from their spouse or partner.
  • 43% say they wish they had guidance or advice, or a checklist, for how to talk to their spouse or partner about money.

Think hard about how you and your partner deal with finances, Ask yourself:

  • Can you both agree to consider your income and debt as shared?
  • If one of you, or both, are “spenders” can you rein that habit in?
  • Can you commit to 3-5 years of making the monthly payment together?
  • Are you in a position to both live on a budget and work together as partners?
  • If you can’t work together on finances, are you both willing to seek further credit counseling and financial literacy resources in order to handle your finances in a way that will work with the plan?

Talk to a Credit Counselor

If you and your partner are struggling to pay bills every month, particularly if you’re loaded down with credit card debt, talking to a credit counselor at InCharge Debt Solutions can help you figure out what your best options are.

The counselor will review your finances and budget with you and discuss debt-relief solutions that include debt management programs, debt consolidation, debt settlement and even bankruptcy. Counselors at nonprofit credit agencies are required by law to give you advice that’s in your best interest, not to sell you a product.

No matter what you decide about a joint debt management plan, a counselor can also point you toward help with budgeting, financial literacy and resources that can help you and your partner build a better financial future together.

About The Author

Maureen Milliken

Maureen Milliken writes about personal finance and debt relief topics for InCharge Debt Solutions. She started as the “Business Beat” columnist for the now-defunct Haverhill (Mass.) Gazette and has been writing about finance, real estate and business for more than 30 years. She also is is the author of three mystery novels and two nonfiction books.


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