Checklist for Those on Debt Management Plan

By: Andrea Smith
When confronted with serious debt, people often run to credit counseling agencies for help. True, you can find reputable non-profit organizations or credit counseling services who offer genuine debt relief. However, Federal Trade Commission (FTC) warns consumers against fake credit counseling agencies who may take advantage of your bad debt situation.

Take note that being a “non-profit" credit counseling organization does not guarantee that it is legitimate. Some groups may claim to be non-profit yet may charge unreasonable fees and hidden costs for their services. If you're not aware of deceptive tactics that fake agencies use, you could be in trouble. For example, a false agency may force a client to enroll in a DMP or Debt Management Plan. Although, enrolling in a DMP is not bad, you need to make sure that you're dealing with a trusted credit counseling service.

What is a Debt Management Plan?

Under a Debt Management Program, you would be submitting monthly payments to the agency. In turn, your agency would be the one to distribute your payments to the corresponding creditors. This is usually done after a credit counseling agency has negotiated with your creditors.

The danger about this arrangement is that your credit counseling agency may not be submitting your payments to your creditors on time. Some fraudulent organizations have been found to use their clients' money instead of submitting them to the appropriate lenders. As a result, the borrower is stuck in debt with his creditors without his knowledge. If you have decided to enroll in a DMP, make sure that your creditors are promptly receiving your debt payments.

What if the credit counseling agency that handles your debts goes out of business?

If your credit counseling agency is going out of business, you need to act right away. Here are the steps you should do:

If you're in an automatic payment system, call your bank and stop your payments immediately.

Speak with your creditors and inform them about the situation. Tell your creditors that your credit counseling agency has shut down. Explain to your creditors that you are willing to continue with your current payment plan even without the aid of the agency.

Submit your payments directly to your creditors and make sure that you submit your payments on time.

Check your credit report. Make sure that all your payments have been properly submitted to your creditors while you were still enrolled in the DMP.


About The Author:
Andrea Smith is a writer and consultant with Consolidate4Free.com and has been providing consumers and business owners with Free Debt Consolidation Advice since 1990. For years she has helped people with loan and credit problems especially pertaining to Debt Consolidation and Credit Card Debt Consolidation.