How Does a Debt Management Program (DMP) Work


Understanding how debt management works to help you reach zero.

As a consumer, you want to know how a particular debt solution can actually help you accomplish your goals. Most people don’t become familiar with debt solutions until they need to use them. This creates uncertainty that prevents you from moving forward. With that in mind, this page helps you understand how a debt management program works. That way you can decide if it’s worth exploring as a potential solution to your particular challenges with debt.

How debt management works in 3 steps

  1. A trained credit counsellor evaluates your debt and budget to see if you qualify; this is based on how much you owe and your income – credit score is not a factor.
  2. Once they help you enroll, they negotiate with your creditors to reduce or eliminate interest charges; each creditor authorizes that their debt to be included in the program.
  3. You pay the agency one payment each month and they distribute the money to your creditors as agreed. You can typically expect to pay off your debt in-full within 36-60 payments.

An in-depth breakdown of how a debt management program works before, during and after…

What to expect prior to enrollment

In order to enroll in a debt management program (DMP), you have to go through credit counselling first. This part of the process is free. You contact a nonprofit credit counselling agency. They provide a free debt and budget evaluation to see where you stand. They review all of your options for debt relief, including seeing if you qualify for a debt management program.

Eligibility for a debt management program depends on:

  1. How much (and what types of) debt you have
  2. Whether you have funds available to keep up with an adjusted payment schedule

Once it’s determined that you’re eligible, the credit counsellor helps you compare a DMP to other options for relief.  If you determine together that a debt management program is your best option, you can enroll immediately. It’s usually recommended to enroll quickly, so you can start enjoying relief from your debt as soon as possible.

What to expect once you enroll

After you’ve enrolled in a program, the credit counselling agency continues to work closely with you. They:

  1. Arrange a payment schedule that works for your income level
  2. Help you create a balanced budget so you can break your reliance on credit cards
  3. Negotiate with creditors to reduce or eliminate interest charges
  4. Work with creditors to stop any future penalties or fee
  5. Distribute monthly payments to your creditors on your behalf
  6. Help you make arrangements if you run into trouble and can’t make a payment
  7. Provide resources to help you learn better credit and budgeting habits

The agency essentially runs point on your debt management plan. This takes the pressure off of you. You only have to worry about making one payment every month. You also don’t have to deal with the stress of collection calls because your creditors are getting paid back.

What to expect after you complete the program

Once you graduate from a debt management program and successfully eliminate all of your debt, the credit counselling stays in touch. Their goal is to ensure that once you get out of debt, you can stay that way.

This involves providing continuing education in personal finance, from budgeting and debt management to saving and investing. You essentially build a lifetime partnership to ensure you can achieve and maintain financial stability in the long term.

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