Do You Have to Put All Unsecured Debt Into Debt Management or Can You Choose?

Debt management plans are designed to help consumers pay off debt faster.
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While credit cards can be a convenient way to make purchases or pay bills, they can also lead to financial trouble if you can't keep up with your payments. If you're trying to get out of debt but don't seem to be making any progress, a debt management plan may be the answer. Before enrolling in a debt management program, it's important to understand how these programs operate and what debts you can consolidate.

How Debt Management Works

Enrolling in a debt management plan begins with contacting an experienced credit counselor. The credit counselor will ask you questions about your debts, your income and your monthly expenses to help you create a debt repayment plan. The counselor or debt management agency will contact your creditors on your behalf to propose a repayment agreement. If the creditor accepts the terms, you make one monthly payment each month to the debt management plan. Your credit counselor then distributes the funds among your creditors. In some cases, the counselor may be able to negotiate with your creditors to reduce your interest rates or waive certain fees.

Unsecured vs. Secured Debts

Debt management plans are designed to help consumers who are struggling with unsecured debt. Unsecured debt is a debt that does not have any collateral attached to it. Examples of unsecured debt include credit cards, unsecured personal loans and unpaid medical bills. Debt management programs typically do not allow for the consolidation of secured loans, which are tied to property or another asset. If you have a large amount of outstanding unsecured debt and you're also struggling to make payments on a secured loan, such as a mortgage or car payment, a debt management plan may not be your best option.

Excluding Certain Debts

Generally, credit counselors will recommend that you include all of your unsecured debts when enrolling in a debt management plan. Doing so ensures that you're making regular payments to your debts and reduces the possibility that you will default on one of your obligations or incur new debt. However, there are circumstances in which you may not want to include a specific debt. For example, you may wish to make payments to a particular debt outside of the plan if the repayment terms are more favorable than those offered by the DMP. Your credit counselor can guide you in determining which debts to include in the plan.


There are a number of factors to consider prior to enrolling in a debt management program. Typically, you'll be required to close all of your open accounts prior to enrolling, which can potentially cause your credit score to drop. Depending on the credit counselor you choose, you may be required to pay an enrollment fee, a monthly maintenance fee for their services or both. Finally, if you fail to make your monthly payments on time, you may be dropped from the debt management plan. If you drop out of the plan, your creditors can reinstate the original repayment terms, which can cause your interest rates and monthly minimums to increase significantly.

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