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A debt management plan helps eliminate credit card debt without taking out a loan. Debt management plans consolidate debt, may reduce interest rates and provide affordable monthly payments based on your budget.

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What Is a Debt Management Plan?

A debt management plan is a carefully constructed payment schedule, set up and managed by a nonprofit credit counseling agency, like InCharge Debt Solutions.

The purpose of the plan is to pay off credit card debt by reducing interest rates and creating an affordable monthly budget. There is no loan involved and credit scores are not a factor in joining the program.

Making a commitment to financial discipline is key. When you’re enrolled in a debt management program, creditors require you to close your credit cards, so as not to incur additional debt.

Features of a Debt Management Program

There are many compelling features about debt management, including:

  • Consumers make one consolidated monthly payment to a nonprofit credit counseling agency, which then pays off all creditors, in an agreed upon amount.
  • Creditors offer reduced interest rates on credit card debt to as low as 8% (sometimes your interest rate could be as low as zero).
  • Monthly payments are calculated at an affordable rate based on the consumer's budget and are agreed upon by the creditor.

Credit Card Debt Management: How to Enroll

Enrolling in a debt management program requires a credit counseling session to determine that this is the best solution for your debt problems.

The process begins with a phone call to InCharge Debt Solutions or you can start with an online credit counseling session. The counseling session should take 25-40 minutes.

 What to expect in a credit counseling session:

  1. Our certified credit counselors help identify the root cause of your debt.
  2. Our counselors help create an affordable monthly household budget by examining income and offering recommendations  to lower your expenses.
  3. We’ll pull a snapshot of your credit report to make sure your balances and monthly payment requirements are accurately recorded.
  4. We’ll provide a debt-relief recommendation, based on income and debt.
  5. If a debt management program is your best option, you can sign up immediately.
  6. Card companies usually require you to close credit card accounts, but some will agree to allow you to keep one card off the program for use in emergencies.

Video: How Does a Debt Management Program Work?

This video explains how a nonprofit debt management program works by consolidating your credit card balances into one payment and saving you money by reducing your interest rates and fees. It defines a clear and realistic goal – to pay off your debt in a 3-5 year time span.

Pros & Cons of Debt Management

Debt management programs are one of the most effective debt-relief options available. They work because monthly payments are tied to a custom-designed budget tailored to your income and spending.

As with all debt-relief solutions, consumers should do research to make sure they understand the ups and downs associated with a debt management program.

Pros of a Debt Management Program:

  • Affordable payments: Credit counselors at InCharge review your income and expenses to determine how much money is available to apply to credit card debt. Card companies reduce the interest on your credit card debt to an affordable level. In many cases, interest rates drop from the mid-to-high 20s down to single digits of around 8%.
  • Simple payment: A single payment goes from your bank account to InCharge, which then distributes it to all creditors in an agreed-upon amount. This means no more late fees tacked on to your balance.
  • Fixed timetable for eliminating debt: Debt management programs are set up to eliminate credit card debt in 3-5 years, or less.
  • Account management software: You can use this 24/7 to review all payments, update balances and track progress.
  • Improved credit score: Your credit score may take a hit the first 6-12 months because all of your credit cards are closed. However, as on-time payments (the largest portion of your credit score) are reported, expect your score to make a strong comeback.
  • Financial education: Credit counselors are there to advise you throughout the repayment process and offer articles, workbooks and other financial literacy that helps educate you on managing debt.
  • Phone stops ringing: No more calls from collection agencies.

Cons of a Debt Management Program:

  • Only applies to unsecured debt: You can’t include student loan, mortgage or auto debt.
  • Penalty for missing payment: If you miss a payment, your debt management program may be canceled.
  • Cards go away: One of the provisions of the program is that you stop using your credit cards.
  • Not every company will accept a proposal for reduced interest rates: The smaller banks and possibly some of the department store or gas station card companies don’t always accept debt management programs.
  • It takes time: Some consumers want a quick solution, and this isn’t one. It’s set up for 3-5 years, so payments remain at an affordable level, improving your chance to succeed.

Is a Debt Management Plan for You?

Debt (and debt management plans) are not one size fits all. Not all consumers are in debt for the same reason and that’s why there are multiple solutions for people trying to climb out of a financial hole.

The ideal candidate for a debt management plan is someone with high-interest debt (i.e. credit cards) – and a steady enough income to handle that debt.

If you struggle to keep up with credit card balances but are meeting the financial obligations on your secured debt such as your mortgage and car payments, you’d be joining a very long line of people who might benefit from a debt management plan.

Just know that debt management plans might not be your best option if:

  • Credit card debt is only part of a larger burden and you’re also having trouble paying secured debts.
  • You are income strapped and can barely cover necessities such as rent, food and utilities.
  • You want to continue to use your credit cards.

Other Debt Relief Options

If debt management plans might not be the right solution for your credit card problem, there are other debt-relief options.

The alternative solutions could be:

Debt Consolidation Loan

If you qualify – i.e. you have a very good credit score, 670 or higher – you would receive a loan that could pay off your credit card debt at a lower interest rate and monthly payment.

Unfortunately, you still owe the bank that gave you the  consolidation loan so you’ve transferred the burden from one source to another. Use a debt consolidation calculator to see how much you could  save with a lower interest rate and fixed monthly payment.

Debt Settlement

Debt settlement is when a creditor agrees to accept payment that is less than what is owed on your credit card debt. Sounds too good to be true? Well, there’s reason for that.

This is a risky alternative. You may end up paying less than you owe, but your credit score will plummet. You’ll find it difficult to get a future loan since you failed to make the full payment on this one. And keep in mind you could still pay taxes if the amount forgiven is more than $600. So, consider debt settlement only if other avenues are closed.

Credit Card Debt Forgiveness

This is the same principle as debt settlement – pay less than what you owe – but with some major differences.

Credit card debt forgiveness is only offered by a few nonprofit credit counseling agencies (including InCharge Debt Solutions) and they only have agreements with a select group of card companies. These companies already have agreed to allow qualified consumers to pay 50%-60% of what they owe over a 36-month period and waive the remaining balance.

Read about all the terms and conditions at credit card debt forgiveness.


When the size of your debt overwhelms your income, it may be time to consider a fresh start through bankruptcy. A successful bankruptcy filing will eliminate all credit card debt, but also leaves a 7-10 year negative mark on your credit report.

Do-It-Yourself Debt Management

Using InCharge’s guide and help with organizing your payments, you can absolutely set up a debt management program on your own.

Hardship Programs

Not all lenders offer hardship programs, but it certainly is in your best interest to ask.

Sudden job loss, severe pay cut, a debilitating illness, divorce, family emergency or natural disaster may qualify you for hardship consideration depending on the lender and your particular circumstances.

Terms vary depending on the financial institution, but a credit card hardship program typically is a payment plan negotiated with your card’s issuing bank.  The bank may agree to waive fees and/or lower interest rates for a specified period of time.

Debt Management Program Frequently Asked Questions

InCharge does not report your participation in a debt management program or plan to the credit bureaus, however your creditors might. Your credit score may decrease when your credit cards are closed and then increase as you make consistent on-time payments over the course of the program. Every person’s credit situation is different. In order to better understand how a debt management program may affect your credit score, learn more about how credit scores are calculated.

We strongly discourage you from opening new credit cards on a debt management program. Instead, we recommend creating room in your budget by reducing expenses and looking for ways to earn additional income.

Yes, you can get a mortgage while on a debt management program, as long as your credit score is healthy and your debt payments do not consume too high of a percent of your income.

Make sure you are working with an NFCC-member nonprofit credit counseling agency like InCharge Debt Solutions. Nonprofit credit counselors provide impartial financial advice tailored to your best interests. A nonprofit debt management program will have low fees and work to secure interest rate reductions on your credit card debt, so you can pay off your debt by making consistent affordable payments.

You should be able to pay off your credit card debt in 3-5 years on a debt management program or plan. Your payment will be based on five years of equal installments, paid monthly, but you can pay it down faster. As part of the program, we will share cost-savings strategies that will free up more of your household income to pay off debt.

On average, the monthly fee is $33, depending on which state you live in and the size of your debt. If you enroll in a debt management plan, there is also a one-time, set-up fee of $75 – though this fee also varies by state.

Your creditors will require you to close your credit card accounts once you have enrolled in a debt management program.

To start the process, call one of our credit counselors at 800-565-8953 or fill out our Get Help Now form. You will receive a free credit counseling session and our counselors will determine if debt management is the best solution for you.

The average length of a DMP is 3-5 years, but is shorter for clients who decide to aggressively deal with their debt. Many clients pay down debt faster by using income tax returns, inheritance money or some other unexpected source of income. There is no penalty for paying the debt off early. You can make additional payments while on the plan and pay off your debt faster.

The No. 1 benefit is a lower monthly payment, and the potential of reduced interest rates. There is the convenience of making only one payment for all your debts. You also receive valuable education materials, including financial tips and reminders for payments due. InCharge clients can track their progress online, see their balances and percent of debt they've paid off. 

All information shared with InCharge is confidential. Please see our privacy policy for details.

Many consumers see a significant reduction on interest rates from participating creditors. Typically, interest rates could be reduced to somewhere around 9% and sometimes as low as 2%. 

After reviewing your situation and credit profile, our credit counselors may recommend an alternative solution such as credit card forgiveness, debt settlement or bankruptcy.

Bankruptcy is a last-ditch attempt to settle debts. It is a legal proceeding in which you liquidate all non-exempt assets in order to wipe out debt (Chapter 7) or persuade creditors to approve a repayment plan over a 3-to-5 year time frame to eliminate debt. There are severe consequences for both, including a drop of as much as 200 points in your credit score and the bankruptcy action remaining on your credit report for 7-to-10 years. A debt management program is not a legal proceeding. A notation that you are in a DMP could appear on your credit report, but there should be little impact on your credit score until you complete the program. At that time, you could expect your credit score to improve, sometimes dramatically.

When you enroll in a DMP and start making payments, calls from enrolled creditors should cease.

InCharge credit counselors contact the creditors to make them aware you are participating in the program and request lower interest rates and monthly payments. You also receive responses from creditors once proposals are accepted.

InCharge counselors work with you to establish a debt management plan that allows you to make affordable payments every month. If your financial situation changes, call InCharge immediately and our credit counselors will review your situation.

Consumer privacy is at the heart of everything we do. InCharge is committed to protecting your personal information by continuing to upgrade and implement market-leading technologies for system integrity and risk management.

About The Author

George Morris

In his 40-plus-year newspaper career, George Morris has written about just about everything -- Super Bowls, evangelists, World War II veterans and ordinary people with extraordinary tales. His work has received multiple honors from the Society of Professional Journalists, the Louisiana-Mississippi Associated Press and the Louisiana Press Association. He avoids debt when he can and pays it off quickly when he can't, and he's only too happy to suggest how you might do the same.


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