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    What Is Debt Management?

    Debt is one of the leading causes of stress in America and for good reason. It can make paying basic necessities such as food, rent, and transportation difficult.

    Due to this, there are non-profit credit counseling agencies that help individuals put together a debt management plan (DMP).

    This plan involves combining all consumer debt into a single monthly payment, often at a reduced interest rate. These plans offer a structured route to a debt-free life

    Having to undergo a procedure or visit a professional that is not covered by a health insurance policy can result in major financial stress.

    Due to this reality, many healthcare providers offer patients access to medical credit cards as an alternative way to pay for their medical expenses.

    What Exactly Is a Debt Management Plan? 

    A debt management plan is something a non-profit credit counseling service puts together for individuals who are struggling with repaying consumer debt.

    Those who decide to go through with these plans are put on a fast track to paying off unsecured debts, usually at more favorable terms. 

    • What Debt Can Be Included: Nearly all types of unsecured consumer debt can be included within a DMP. For most individuals, this will include credit cards, department store cards, lines of credit, and personal loans.
    • How Does The Counselling Agency Help: When a borrower opts for a DMP, the debt counselor will contact the borrower’s creditors and inform them that they are not the payee on that account. The agency will also seek out specific terms, such as lowered interest rates and a “re-aging” of the account to mitigate late fees. 

    Does A Debt Management Plan Impact Your Credit Score?

    Committing to a DMP does not, in itself, have an impact on a credit score. That being said, many of the actions taken during the process will have an effect.

    • Closing Of Accounts: Under a plan, when a credit card is paid off the account is usually closed. Repaying a few accounts can significantly lower one’s credit utilization ratio, but also lower their credit score as the age of their accounts declines.
    • Paying Off Accounts In Full: With a plan in place, the counseling agency pays off the accounts and then collects money from the individual. For those who have been delinquent on their accounts for some time, the sudden full repayment can have a positive impact on their credit score.
    • Less Harmful Than Chapter 7/13 Bankruptcy: A debt management plan is a strongly preferred option to bankruptcy. A chapter 7 or 13 bankruptcy will stay on one’s credit report for up to 8 years and will have a major impact on their credit score.   

    Who Is Eligible For Debt Management? 

    A debt management plan isn’t intended for borrowers who face extreme difficulty making their monthly payments.

    Instead, a DMP is best suited for those whose monthly income allows them to make payments on their debt but would like some relief to simplify the process and bring down costs. 

    It should be noted that these plans are almost exclusively for consumer credit card debt.

    This has much to do with the type of relationship credit counseling agencies have with credit card providers - a type of relationship they don’t share with lenders of car or personal loans. 

    Debt Management Vs Debt Settlement

    As previously stated, a DMP combines outstanding consumer debt into a single monthly payment. These plans usually carry a term of between three and five years and new lines of credit typically cannot be opened up during this period. 

    The fundamental difference between debt settlement and a DMP is that with debt settlement the initial loan isn’t replaced with another one. Instead, the borrower attempts to reduce their outstanding balance through a series of negotiations with their creditors. If an agreement is reached, the borrower will usually be required to pay off the agreed-upon amount in one lump sum.

    Debt Management Pros and Cons 

    As with any debt relief solution, a debt management plan comes with its own set of pros and cons.


    • The majority of creditors will reduce interest rates on outstanding debt
    • Stops all collection activity on included debt
    • It can reduce monthly payments
    • No new debt is taken on to pay off the original debt
    • Single monthly payment makes debt easier to manage 
    • Less damaging to credit score than other debt management solutions
    • Keeps credit score intact
    • Late fees are erased 


    • Some creditors do not participate in DMPs
    • In most cases, it’s only applicable for credit card debt
    • No new accounts can be opened and no additional debt can be accumulated during the process
    • Missed payments can result in loss of benefits
    • The repayment term is aggressive and those who fail to meet their payment obligations can expect to receive a major negative impact on their credit report
    • While the interest rate and late fees may be lowered, the creditors are still expecting to receive payment in full, meaning no debt forgiveness 


    A debt management plan is one of the best credit card debt repayment solutions available to consumers. Those borrowers who undergo this process must ensure they have the discipline and financial resources to go through with the plan until the