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What Is a Debt Management Plan?

Updated on:
Content was accurate at the time of publication.

If you’re struggling to manage debt, it may be time to explore a debt management plan (DMP). A DMP is a tool offered by credit counselors to help borrowers pay off their debt within a few years. While a DMP can help reduce what you owe and improve your credit, it may not be for everyone.

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What is a debt management plan?

A debt management plan is a financial strategy to pay off unsecured debt, typically from credit cards, within three to five years. The process is led by a credit counselor. Credit counseling services are often nonprofit organizations. They help consumers better manage their debt at little to no cost, though you may need to pay a startup fee and monthly service fees.

With a DMP, your credit counselor can negotiate with your creditors on your behalf to do things like waive fees, decrease your interest rates or lower your monthly payments. This can make your bills more affordable and help you to pay off debt faster.

While you’re in a DMP, you’ll provide payments to your credit counseling agency, which will then pay your creditors. As you repay your debt, your credit utilization ratio will decrease and you may see your credit score improve. While your DMP won’t be listed on your credit report, the accounts enlisted in the plan may be recorded as being paid through a DMP — though this should be removed once the balances are paid off.

Debt management plan pros and cons

A DMP can be a helpful tool if you’re feeling overwhelmed, but the pros and cons of debt management plans can depend on your financial situation.


  Should typically pay off debt within three to five years

  Can help you build healthy financial habits with a professional

  Your credit score may increase as you pay off debt

  Typically can’t use credit cards while they’re being paid off in a DMP

  Generally won’t cover secured debt or student loans

  May have to pay a startup fee and monthly fees to credit counseling agency

How to get a debt management plan

To enroll in a debt management plan, you’ll need to get started with a credit counseling agency. The U.S. Department of Justice provides a list of legitimate credit counseling agencies you can search through to find one in your area.

Once you begin credit counseling, you’ll likely need to provide the agency with documents such as bank statements, credit card statements and other financial paperwork so they can work with you to come up with a budget to pay off debt. Your credit counselor can then negotiate with your creditors to come up with a new repayment plan.

Credit counseling agency plans

Below are a few examples of credit counseling agencies that offer debt management plans. Many offer free initial financial sessions. Be sure to read any fine print before enrolling in a plan, which generally comes with fees.

AgencyAreas servicedDebt management plan fees
American Consumer Credit CounselingAll 50 states
  • $39 enrollment fee
  • $7 monthly fee
ApprisenAll 50 states
  • Max $45 enrollment fee
  • Max $45 monthly fee
Cambridge Credit Counseling Corp.All 50 states
  • Max $75 enrollment fee
  • Max $50 monthly fee
GreenPath Financial WellnessAll 50 states
  • $0-$50 enrollment fee
  • $0-$75 monthly fee
Money Management InternationalAll 50 states
  • $33 average enrollment fee
  • $25 average monthly fee

Alternatives to debt management plans

If a DMP isn’t right for you, you can also consider the following financial strategies to tackle your debt.

  • Repayment strategies: Instead of going to a credit counselor, you can use aggressive plans on your own to cut down on debt. Here are two tactics:
    • The debt avalanche method instructs consumers to pay off their debt starting with the account with the highest interest rate. This can save you money on interest.
    • The debt snowball method focuses on paying down your smallest balances first, though it can cost you more in interest.
  • Debt consolidation: Debating credit counseling versus debt consolidation? A debt consolidation loan is the combination of all your debt into a new, single personal loan. This option is helpful if you can secure a reduced interest rate than you’re currently paying.
  • Debt settlement: Instead of using a credit counselor to negotiate your debt, you can use a debt settlement company to do so. However, these companies can come with large fees and could even end up costing you more in the end. Keep in mind, you can negotiate with your creditors yourself, for free.
  • Bankruptcy: In some cases, it may be best to wipe the slate clean. Bankruptcy allows consumers to discharge their debt through the legal system, though it’s not without its drawbacks. It may not only cost you in legal fees, but it may be difficult to qualify for new credit.

One concern some consumers have is how credit counseling affects your credit score. A DMP won’t directly go onto your credit report, but it can have a positive impact on your credit score as long as you make on-time payments and continue to lower the amount of debt you have.

One of the downsides of a DMP is that you may have to close any credit cards listed on your plan while you’re enrolled. So, if you find yourself backed into a financial corner, you won’t be able to use your credit cards. If this is a concern, instead consider strategies to pay off credit card debt.

A DMP won’t be listed on your credit reports; however, your on-time or late payments will be as well as any debts you have.

Yes, you can pay your DMP off early. You can do this by providing a larger monthly payment. Doing this can help lower your credit utilization ratio and help improve your credit score.

While it’s not impossible to qualify for a mortgage while on a DMP, it may be challenging to find a lender that will approve you. Each lender will have its own set of mortgage requirements so be sure to check with a potential lender that a DMP won’t disqualify you before filling out an application.

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