Debt Management Programs: A Helpful Guide

Debt can feel overwhelming. If you’re struggling to make payments and keep up with high interest rates, a debt management program (DMP) may help provide some relief. At Delancey Street, we understand – we’ve helped thousands of clients get their finances back on track. This guide will walk you through how DMPs work, who they can benefit, and what to consider before signing up for one.

What is a Debt Management Program?

A DMP is a repayment plan facilitated by a credit counseling agency to help you repay unsecured debts like credit cards, medical bills, and personal loans. Here’s how it works:

  • You’ll work with a credit counselor to review your finances and create a monthly budget. They’ll help determine a fixed payment you can afford each month.
  • The counselor will then contact your creditors and try to negotiate reduced interest rates and waived fees. Creditors often agree because they want to ensure they get repaid.
  • You’ll make one monthly payment to the agency. They distribute funds to your creditors according to a payment schedule.
  • Most plans aim to repay debts in full within 3-5 years. As you make payments, counselors provide support and financial education.

DMPs can make debts more manageable by lowering interest rates and consolidating payments. Nonprofit agencies like us provide the service for free or a small monthly fee.

Who Can Benefit from a Debt Management Program?

DMPs work best for those with steady income who can repay debt in 3-5 years with reduced rates. Good candidates have:

  • Unsecured debt totaling 15-39% of annual income
  • Enough income to maintain basic expenses and repay debt
  • Motivation to become debt-free and avoid new credit during the program

DMPs generally aren’t recommended for those with debt over 40% of income or secured debt like mortgages. Other options like debt settlement or bankruptcy may be better suited.

The Pros and Cons of Debt Management Programs


  • Lower monthly payments
  • Reduced interest rates
  • Consolidated payments
  • Avoid collections calls
  • Less impact on credit than bankruptcy


  • Fees for the service
  • Credit cards enrolled will be closed
  • Late payments can cancel benefits
  • Secured debts aren’t eligible
  • Can’t open new credit during program

DMPs provide affordable payments and interest savings, but require discipline for 3-5 years. Make sure you can commit before enrolling.

What to Expect with a Debt Management Program

Here’s a step-by-step overview of the process:

  1. Consultation: Review your budget and debts with a counselor. They’ll explain how a DMP works and if it’s the right option.
  2. Enrollment: Provide documentation of income and expenses. Sign an agreement detailing the program terms and monthly payment.
  3. Account setup: The counselor will contact creditors to request reduced rates and fees. Accounts are closed as they’re enrolled in the program.
  4. Monthly payments: You’ll send one payment to the agency each month. They disburse funds to creditors per the payment schedule.
  5. Ongoing support: Your counselor will check in periodically to see if any changes are needed as your finances evolve.
  6. Debt repayment: As you make consistent payments each month, your debts will be paid off over 3-5 years.
  7. Program completion: Once all enrolled debts are repaid, the DMP is completed. The agency notifies credit bureaus.

Staying disciplined can be challenging, but counselors are there to help keep you on track and provide guidance when needed.

Alternatives to Debt Management Programs

While DMPs work for many, they aren’t the only option. Here are a few others to consider:

  • Debt snowball or avalanche: Pay extra toward debts in order of smallest to largest balance or by highest interest rate.
  • Credit counseling: Work with a nonprofit counselor to create a debt repayment plan without formally enrolling in a DMP.
  • Debt consolidation loans: Combine debts into one loan with lower interest. Requires good credit.
  • Balance transfer cards: Transfer credit card balances to a new card with a 0% intro APR.
  • Debt settlement: Negotiate with creditors to settle debts for less than you owe. Hurts credit.
  • Bankruptcy: Court-supervised process to eliminate eligible debt. Chapter 7 liquidates assets while Chapter 13 allows 3-5 year repayment plan. Severely damages credit.

Each option has pros and cons. A reputable credit counseling agency can provide guidance on picking the debt relief solution that best fits your needs.

Finding the Right Program for You

Choosing an accredited nonprofit agency you trust is key when seeking a DMP or credit counseling. Here are tips for picking a reputable provider:

  • Look for NFCC or COA accreditation
  • Check BBB ratings and online reviews
  • Ask about their success rate for completing DMPs
  • Make sure they offer educational resources
  • Understand all fees before enrolling
  • Confirm they help create personalized budgets

Avoid any agency that pressures you to enroll or tries to collect fees before providing services. Legitimate counselors will discuss your full financial situation first.

Get Your Finances Back on Track

DMPs aren’t a magic bullet, but can provide affordable payments, interest savings, and valuable guidance. For those with steady income who are motivated to eliminate debt, it can be a helpful debt relief option. As you consider your alternatives, focus on finding the solution that fits your circumstances. And don’t be afraid to ask for help – reputable agencies want to see you succeed!At Delancey Street, our caring counselors are ready to review your situation and explain how we can help you overcome debt. Reach out today to start a free consultation. With commitment and support, you can get your finances back on track.

Delancey Street is here for you

Our team is available always to help you. Regardless of whether you need advice, or just want to run a scenario by us. We take pride in the fact our team loves working with our clients - and truly cares about their financial and mental wellbeing.

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