Should I Continue with My Debt Management Plan?

Q. I have been in a debt management plan for a year now. The payments are over $1,400 per month and I am having difficulty making these payments. Should I try to continue with my Debt Management Plan?

A. In a Debt Management Plan (DMP), you make monthly deposits with the company that arranges this plan for you. The company then uses your deposit to pay your credit cards and other debts according to a payment arrangement the company creates with your creditors. Often, the creditors agree to a lower interest rate to help you eventually pay off your debts. Typically, a DMP will take four to five years to complete.

For a debt in excess of $60,000, your monthly payment under a DMP will be around $1,400 per month over 60 months and you will pay over $16,000 in interest. Your total repayment will be in excess of $76,000. If you miss payments in a DMP or drop out before the plan is completed, fees, interest and other charges may be added in to the balance due. This type of plan provides no balance forgiveness.

Determining whether or not this individual should continue with the DMP requires an analysis of a number of factors. First, what is the likelihood that the individual will be able to maintain payments of $1,400 for another four years? This may depend on the stability of the person’s job, whether they support others or whether other major expenses may come up during the next four years. It may not make sense to continue to struggle to make these payments if failure seems likely sometime down the road. If this is the case, the individual should consider other debt relief options.

Bankruptcy may be a good option is your income is low and you don’t have any assets to protect that may be lost in bankruptcy. However, for those that don’t qualify for a bankruptcy, getting out of debt through the debt settlement process may be a good option. It is important to understand the ramifications of the choices you make when it comes to deciding on the correct debt relief option for you. I always recommend that you consult with one or two attorneys to discuss these options and figure out what is best for your situation. Most consumer attorneys will offer a free consultation to help you weigh your options. Act quickly so you don’t make your situation worse.

Daniel R. Gamez, an attorney focusing exclusively in debt settlement, is licensed to practice in all state and federal courts in California and Texas. Mr. Gamez owns and operates the Gamez Law Firm in La Jolla, CA. For more information, please contact Daniel Gamez at 858-217-5051, daniel@gamezlawfirm.com or visit gamezlawfirm.com.