Debt management plans (DMPs) are different from debt settlement. Unlike debt settlement, which focuses on negotiating a reduced payoff amount, DMPs help people repay their debts in full under more manageable terms. DMPs are usually offered by nonprofit credit counseling organizations. These organizations have certified counselors trained in consumer credit, money and debt management, and budgeting. They help you create a budget and a plan to manage your debts.

How debt management plans work:

A nonprofit credit counseling organization will:

• Pull a credit report to get a list of all your debts,
• Identify which debts can be included in your DMP, usually credit cards, student loans, and medical debts,
• Work with creditors to reduce fees and lower interest rates on your debt,
• Require you to make one monthly payment to the credit counseling organization, which will be used to pay your creditors.

Credit counseling organizations charge a monthly fee, typically $25–$50.

Most credit card companies require that you close your credit card account to be included in a DMP. As long as you make on-time payments to the credit counseling organization, your creditors should receive payments on time, minimizing the impact on your credit score.

Learn more about finding a qualified credit counseling organization.