Debt Management Program (DMP)

Struggling to make minimum monthly payments?

Overwhelmed by medical bills?

Receiving debt collector calls and late notices?

Fallen behind on your payments and can't catch up?

Considering filing bankruptcy?

Unable to refinance your mortgage?

What is a Debt Management Program (DMP)?
A Debt Management Program (DMP) is a repayment program designed to help consumers get out of debt. DMP is a method used for paying personal unsecured debts when individuals are experiencing an immediate financial hardship and are unable to meet their current financial obligations. The DMP provides a systematic way to pay down outstanding debt by providing participants with account benefits not available to consumers outside of a DMP. Program benefits may include more affordable payments and a shorter payoff period, lowered interest rates and not charging past due, overlimit and/or annual membership fees, and one convenient monthly deposit that will be disbursed directly to creditors.

It takes approximately 24-60 months to repay debts through a DMP and once you've met these obligations, we'll help you rebuild your credit.

How Does a DMP work?
DMPs are a managed informal arrangement with creditors who agree to accept any terms of a DMP proposal put forward on behalf of the debtor. DMPs are typically a managed arrangement with creditors through an approved non-profit credit counseling agency. Accepting any terms of a DMP proposal put forward on behalf of the debtor is always at the discretion of the creditors.

What types of debt can be included in a DMP?
Participation in a DMP is restriced to unsecured creditors such as credit cards, personal loans, medical bills, retail store cards, and unpaid collection accounts. Secured debts like mortgages, car loans, rent and utilities, are not subject to monthly payment reductions.

What are the warning signs that a consumer needs help?
Identifying the warning signs of poor debt management planning is the first step to correcting it. It is important to be honest with yourself. Are you contributing to your debt management issues without realizing it? Ask yourself the following:

• Are you unable to pay your creditors on time and are starting to receive collection calls?
• Are you living paycheck to paycheck? Do you have little or no money put aside in a savings account?
• Are using a significant amount of your monthly income to pay toward your debt (Generally more than 20%)? (This does not include mortgage payments).
• Do you often use credit cards or borrow money for items that you used to purchase with cash?
• Can you only afford to make the minimum monthly payment on your credit cards? Or are you skipping some payments in order to make other payments on time?
• Have you taken out new loans to pay off existing debts?
• Are you consistently late paying one or ore of your regular bills?
• Are you dependent on payday cash advances?
• Do you hide credit card bills from family members?
• Do you float or bounce checks regularly?
• Have your efforts to work out a reasonable repayment plan with your creditors failed?
• Has your account gone more than 6 months past due and legal pursuit has been executed?

If you answered yes to any of these warning signs, consider seeking professional advice from AAA Fair Credit Foundation. We can help you determine whether or not behavioral issues (such as gambling or compulsive shopping) might be a contributing factor to your debt.

What are the possible benefits of participating in a DMP?

• Teaches important money management habits and necessary money management skills
• Keeps debts from becoming delinquent or being charged off
• Lower monthly payments
• Reduced interest charges (varies by creditor)
• Eliminate late fee or other fees that have accumulated on your account
• Account "Re-age" eligibility with participating creditors
• Stop the repetitive collection calls and legal notices
• Help restore financial balance through consistent monthly payments
• Establish a positive payment history with creditors
• Receive ongoing financial education advice
• Eliminate frustration and save time with one convenient monthly deposit
• Automatic direct deposit deducetd from your checking or savings account
• Learn the discipline of managing your money and eliminating debt
• Offer fair and equitable repayment to all participating creditors
• Lower your debt-to-income ratio to qualify for better interest rates
• Relieve stress and regain financial stability

Surveys show that active clients who have remained in a DMP for over a year report the following impacts:

• Lower levels of financial stress
• Feel better about current financial situation
• Doing better at paying rent/mortgage and bills on time
• Not pre-occupied with financial concerns
• Started contributing to retirement plan
• Feel more financially secure
• Less frequency of financial concerns interfering with work
• Missed less time from work because of inability to pay for child or elder care
• Missed less time from work to handle personal financial matters
• Less frequently bothered with health problems
• Improved sleeping patterns

How to Make a DMP Work for You:

The following steps will help you benefit from a DMP, and avoid falling further into debt.

• Continue to pay your bills until the plan has been approved by your creditors. If you stop making payments before your creditors have accepted you into a plan, you’ll face late fees, penalties, and negative entries on your credit report.
• Contact your creditors and confirm that they have accepted the proposed plan.
• Make sure the payment schedule allows your debts to be paid before they are due each month. Paying on time will help you avoid late fees and penalties. Call each of your creditors on the first of every month to make sure the agency has paid them on time.
• Review monthly statements from your creditors to make sure they have received your payments.
• If your DMP depends on your creditors agreeing to lower or eliminate interest and finance charges, or waive late fees, make sure these concessions are reflected on your statements (*please note - not all creditors list concessions on statements).

How do I choose a reputable DMP service provider?

Beware of providers who are less than reputable — their high fees and unethical policies can leave you in worse financial condition than when you started. Here's what to look for in a debt management provider:

• Properly licensed and bonded
• Counselors spend at least 30 minutes talking to you about your finances before they suggest a DMP.
• Spending enough time thoroughly reviewing your financial situation.
• Charge high fees for enrolling in credit counseling or a DMP.
• Solid record with the Better Business Bureau (BBB)
• In business long enough to have built a solid reputation
• Prompt monthly statements
• Provide financial education tools and resources
• Employ experienced Certified Counselors
• Provide 24-hour online account access
• Electronic proposal/payment processing linked to creditors
• Have existing relationships with most creditors
• Offers multiple options to help you manage debt
• Has a support network to connect with other community partners
• Offers reasonable service fees

Certified Financial Counselors
A financial counselor's main responsibility is to discuss where you are financially and what options are available to you. They also maintain open communication with your creditors. Frequent communication with FCF will help you stay on track in becoming debt-free. Help is just a phone call away. We have a toll free hotline available to our clients and anyone who needs financial counseling assistance.

Creditor Participation
Your creditors will receive proposals within seven to ten days of your plan enrollment. It will often take four to seven weeks for them to process the proposal. Most creditors require three consecutive payments through the debt management plan before they will offer benefits. Often your creditors may notify us only when the proposal is declined. In this event, we will research the cause and work with you and your creditor to make the necessary changes to have the proposal accepted. Please check your creditor’s statements to see if they have started applying benefits.

Program Service Fees
Any program administration service fees charged for the debt management program are based on applicable state laws. Because the monthly DMP administrative service fee is a payment for service and is not considered voluntary, the fee amounts may not be considered as a tax-deductible contribution. If however, a client participating on a DMP and would like to make a seperate contribution aside from their monthly DMP administrative service fee than this amount would be considered voluntary and can be considered tax-deductible. Given the tendency of the changes in tax laws, we recommend you contact your accountant or the IRS for that information.

Impact to Credit Reports
According to the Fair Isaac Company (FICO), the creator of credit scoring, has publicly stated that since 1999 FICO has completely ignored any credit report mention of credit counseling, debt management plans, or any other form of counseling. Therefore, credit counseling and the establishment of a debt management plan may impact the consumer's credtit rating and credit score eithor favorably or unfavorably, depending on creditor policies and the consumer's payment history before and during participation in the debt management plan.

Staying On Track
No one is perfect and it is possible for to make a costly money mistake after receiving the proper credit counseling services. The good news is FCF is here to assist you in all your financial making decisions. Call today to find the right debt solution for you.

If you or someone you know is feeling overwhelmed by debt, please call our National Financial Counseling Center at 1-800-351-4195 for a free confidential consultation with a Certified Financial Counselor. Counseling is available in-person, by phone or online. Get out of debt and get on with your life today, not tomorrow!

**NOTE: THIS SERVICE NOT AVAILABLE IN ALL STATES. A DMP alone is not credit counseling and DMP's are not for everyone. You should sign-up for one of these plans only after a certified credit counselor has thoroughly reviewed your financial situation. A counselor may answer questions about bankruptcy, but not give legal advice. If legal advice is necessary, the client will seek appropriate assistance.