What is a debt management plan?
In short
A debt management plan is arranged by a non-profit credit counselling agency. You make one monthly payment to the agency and it distributes the money to your creditors, who often reduce or stop interest. It is not an insolvency filing, and counselling itself is generally free.
Updated
Who does it suit?
It suits someone who can repay the full balance over time given relief on interest, and who wants budgeting help alongside it. If the balance cannot be repaid in full even without interest, a counsellor will usually say so and point you on.
What does it cost?
Counselling is typically free or low cost. A debt management plan may carry a modest administration fee. A genuine non-profit is largely funded by creditor contributions rather than by charging you.
How do you tell a genuine non-profit?
Check membership of a recognised body such as Credit Counselling Canada, and be wary of any organisation that charges a substantial fee before doing anything. A for-profit business using the word "counselling" is not the same thing.
Frequently asked questions
- Is a debt management plan reported to the credit bureaus?
- Usually yes. Accounts included in the plan are typically flagged, and the flag remains for a period after the plan completes. Ask the agency exactly what will be reported before you enrol with them.
- Do all my creditors have to agree?
- No. Creditors participate voluntarily, so a plan may cover most of your accounts but not all of them. The agency will tell you which of your creditors normally take part.
- Does this site send my details to a counsellor?
- No. Non-profit counselling is free routing: we give you the public member directory and you contact an agency yourself. We are paid nothing for that and never sell those introductions.