Debt Management Plan (DMP)

Why it matters

A DMP is designed for unsecured debts like credit cards, not for secured debts such as a mortgage or car loan. Plans commonly run about three to five years, and creditors — not the agency — decide whether to grant concessions like lower interest. Enrolling usually means closing the cards in the plan, and a DMP is not a loan and not debt settlement: you generally repay the full principal over time. There may be modest setup and monthly fees. A DMP does not stop a lawsuit already in progress and is not the same as bankruptcy. People often compare a DMP with settlement or other options before choosing a path.

Example

Nina owes balances on four credit cards and struggles to track four due dates. A nonprofit counselor sets up a debt management plan where Nina sends one payment each month to the agency, which pays each creditor. Several issuers agree to lower her interest rate, and the cards are closed while she is enrolled. Over about four years, Nina repays what she owes through the single monthly payment rather than juggling separate bills.