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What is a Debt Management Plan?

A debt management plan can be an effective way to repay money you owe to lenders without filing for bankruptcy, but it is important you understand what you are committing to before determining if it is the right option for you.

Most debt management plans are arranged through a consumer credit counseling agency. The agency calculates the minimum monthly payment owed on all of your unsecured debt. They then negotiate a lower interest rate with each lender that reduces the total amount you pay each month. You are responsible for making that single payment to the agency and the agency distributes payments to each lender on your behalf.

How a Debt Management Plan Helps

The advantage of using a debt management plan is that it lowers the total amount of money leaving your pocket each month to pay creditors. You are able to stay current on payments without putting too much of a strain on your income.

Debt management plans are temporary and typically last about two to five years. Working with a credit counseling agency and using a debt management plan is not supposed to hurt your credit score, though some agencies will report your status to the credit bureau. This means future lenders will be aware you faced financial struggle, but that you took action before things got out of control.

It is important that you make your debt management payments on time because if you do not, the previous interest rates are reactivated and you could potentially lose other benefits of your plan’s arrangement.

Why a Debt Management Plan is Not Right for Everyone

Though debt management plans can be extremely helpful for getting your finances back on track and avoiding bankruptcy, they are not right for everyone. They only address unsecured debt, so if your financial problems include secured debts like car loans and mortgages, a debt management plan will not eliminate your challenges completely.

Some credit counseling agencies also prey on desperate consumers. If a credit counseling agency is asking you to pay a significant fee on top of what you owe to creditors, you might find yourself in a worse financial predicament than you were prior to contacting the agency.

When speaking to a consumer credit counseling agency, be sure you understand exactly how much of your monthly payment will be sent to your creditors. There are laws in place to protect against predatory credit counseling, but you are responsible for understanding your options.

Many financial gurus recommend against using debt management plans to help you get back on track. Find out why here.

If you have questions about credit counseling or you believe bankruptcy could provide a better solution for your financial struggles because you are dealing with more than unsecured debt, we can help. Contact the Law Offices of Robert M. Geller at 813.254.5696 to schedule a free consultation to discuss your circumstances.

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$Law Offices of Robert M. Geller, P.A.
807 West Azeele Street
Tampa, FL 33606
T: (813) 254-5696
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T: (727) 532-3939


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23526 State Road 54
Lutz, FL 33559
T: (813) 336-2320





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At the Tampa Bay law firm, the Law Offices of Robert M. Geller, P.A., we help people with consumer bankruptcy matters in the Tampa Bay-St. Petersburg,  Florida communities such as Clearwater,     St. Petersburg, Tampa, Thonotosassa, Riverview, Lutz, Plant City, Brandon, Carrollwood, Wesley Chapel, St. Petersburg Beach, Lakeland, Mulberry, Dade City, Pinellas Park, Largo, Seminole, Odessa, Oldsmar and Lithia, and counties such as Hillsborough County, Pinellas County, Pasco County, Polk County and Manatee County.