Qualifying for a credit counseling agency's debt management plan (DMP) is a fairly simple process. Most agencies are nonprofit and will offer a one-hour consultation that's free for borrowers who fear they may be in over their heads in debt. After you've spoken with a counselor and you qualify, you may elect to enroll in a DMP. However, like most deals, there are strings attached.
How to Qualify
Contact the National Foundation for Credit Counseling, and request a budget consultation. A budget and credit-certified counselor will spend an hour with you, in person, online or on the phone, reviewing your personal circumstances. The counselor will review your credit history and ask you about your other financial obligations. If you are delinquent, or about to be delinquent, chances are the agency will be able to help you. When you call, have each of the account statements you'd like to include in the DMP available.
Qualifying Debts
The biggest caveat to credit counseling is that only certain types of debts can be put into a management plan. Unsecured debts, like credit cards, fall into this category. Asset-backed loans, like mortgages and car payments, aren't eligible for inclusion in a DMP. This is because their payments are usually not negotiable. Other types of debts also don't qualify. For example, tax debts (the IRS or your state's government) won't be included. This is usually because you can work out a payment plan yourself with the taxing authority. Also, debts that you owe a friend or family member won't be included.
Making Timely Payments
Once you're enrolled in the program, you must continue to qualify for it by making timely payments. If you're late, miss payments or continually make partial payments, the counseling agency or your creditor may elect to kick you out of the DMP. If you get kicked out, it may be difficult if not impossible to re-enroll. Your accounts may be marked for collection. The interest rates you're charged will increase, as well. It also may affect your credit history. If you're having difficulty meeting your monthly payment, contact your counselor immediately.
Getting a New Loan
If you need to apply for a new loan during or immediately after your debt management plan, contact your counselor. Qualifying may be difficult. However, the goal of the DMP is to get you back on track financially; if you successfully completed the program and have paid your secured-asset loans on time, it may not be too long before you can obtain new credit. You are eligible to order one free credit report per year from each of the three credit-reporting bureaus, Equifax, Experian, and TransUnion. Review your reports and check that each account that was included in the DMP was marked as "closed by consumer request." You also should check to see that each bill was paid in full. In the future, don't use more than 50 percent of your available credit.
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