How to Become Debt Free With a Debt Management Plan in Alaska

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Written by the Upsolve Team.  
Updated January 3, 2020

Summary

If you are ready to become debt-free and think an Alaska debt management plan is a good fit for you, we can show you how to get started. The following is a step-by-step guide to starting your own Alaska debt management plan.

Many people who work and pay their bills every month nonetheless feel like they are going in circles when it comes to getting out of debt. If you are paying credit card bills every month that never seem to go down or it is getting harder and harder for you to pay all your credit card bills as they become due, you may be a good candidate for an Alaska debt management plan.

AnAlaska debt management plan is a form of debt consolidation that combines all of your debt payments into one. You then make one monthly payment on the total debt every month until it is paid in full. When you use a non-profit credit counseling agency to set up your debt management program, they will usually also be able to lower your monthly payment by getting the credit card companies to lower the interest rate on the credit card debt included in the plan, extend the repayment terms and waive over-the-limit and late fees.

Some of the benefits of an Alaska debt management plan are having one lower monthly payment every month, which pays all your bills. Getting a lower interest rate on your higher interest rate, unsecured credit card debt. Ending annoying and frustrating collection calls. Paying all your debt in full and minimizing the negative impact on your FICO credit score versus filing for bankruptcy or attempting a debt settlement.

As with any debt relief program, there are some risks associated with entering into a debt management program If your financial problems resulted from uncontrolled spending that has not been addressed, then a debt management program will not solve that problem. And if you run up more new credit and begin to miss your debt management plan payments your situation will only get worse.

Is an Alaska Debt Management Plan the Same as Debt Consolidation?

Unlike debt settlement, which we will discuss later, a debt management plan is a form of debt consolidation. Both debt consolidation and a debt management plan result in one lower monthly payment typically with a lower rate of interest. But debt consolidation can also occur by simply taking out a new personal loan. It can also involve refinancing your home, opening a home equity line of credit or doing a credit card balance transfer. However, unlike a debt management plan, all of these forms of debt consolidation usually require a good credit score. And even if you get approved with a lower credit score, it often affects the rate of interest you are charged on the loan.

In order to be worthwhile, whatever type of debt consolidation you do should result in a lower, more manageable monthly payment. It should also pay off as much of your unsecured debt as possible. In addition, unless you get a lower rate of interest with a non-DMP debt consolidation or a lower interest rate or balance reduction with a DMP, the benefit of the lower payment can be outweighed by having to pay more for the debt over time.

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How to Become Debt Free with a DMP in Alaska

If you are ready to become debt-free and think an Alaska debt management plan is a good fit for you, we can show you how to get started. The following is a step-by-step guide to starting your own Alaska debt management plan.


Find a Credit Counseling Agency

Unlike most states, Alaska does not regulate debt management service providers. As a result, it is even more important that you do your own research prior to starting a debt management program with any credit counseling organization.

First, even though Alaska does not regulate debt management service providers specifically, the Alaska Attorney General’s Consumer Protection Division investigates complaints filed against companies engaging in deceptive or misleading practices with the general public. You can contact the Consumer Protection Division and see if any complaints have been filed against the credit counseling organization you are considering working with.

Perhaps the best way to ensure you deal with a reputable credit counseling organization is by dealing exclusively with a certified, accredited non-profit credit counseling organization. Accredited non-profit credit counseling agencies have to abide by certain quality standards set by credit counseling organizations like the Council On Accreditation (COA) and the National Foundation of Credit Counseling (NFCC) that grant their accreditation. NFCC standards are established to ensure that the credit counseling agency deals with the public in an open, honest and professional manner. Foremost among these standards is that all non-profit credit counseling agencies that are accredited provide initial credit counseling free of charge. If you can’t find any accredited non-profit credit counseling agencies locally, there are several nationally accredited non-profit credit counseling agencies you can contact such as Money Management International,CESI or GreenPath. For additional help finding an accredited non-profit credit counseling agency in your area, feel free to contact Upsolve.

What to Expect at Credit Counseling

Your initial credit counseling session is your opportunity to share the details of your financial situation with your certified credit counselor. Your credit counselor will ask you about your finances, your income, and your debts. They will also help you put together a budget and offer to review your credit report and credit history with you. Finally, based on everything you discuss, they will make a recommendation about the debt relief options that are best for you. If you are uncomfortable doing your initial session in person, you can also do it over-the-phone or online. These will usually be self-guided and when you have entered all the requested information the session will end with a recommendation and information on how you can contact a credit counselor in person to get started.

Making the Decision & Getting Started

If you have made it this far and scheduled and completed your initial credit counseling, you’re probably convinced an Alaska debt management plan is a good fit for you. You are also probably anxious to get started. But before you get started, take time to ask yourself a few questions intended to ensure your success with whatever debt relief program you choose.

  • Have you considered all your options? Even if you are looking forward to starting your Alaska DMP you should be sure you have looked into other options. For instance, if you get paid on commission or have irregular income then starting a long term Alaska DMP may not be a good option for you.

  • Have all the set-up fees, monthly fees and other costs of the repayment plan been disclosed to you? If you do choose to go with an Alaska debt management plan there will usually be a set-up fee and monthly maintenance fee attached to the plan. Be sure these fees have been disclosed and explained to you beforehand.

  • Do you have your necessary documents? You may not have brought any documents to your initial credit counseling session. And that is ok. However, in order to start your Alaska debt management plan, you will need to provide certain financial documents to your credit counseling agency. These may include credit card statements, cardholder agreements, pay stubs, and a recent credit report. We will discuss these in more detail in the next section on putting together your Alaska debt management plan.

Put Together Your Alaska Debt Management Plan

Your Alaska debt management plan will be a customized financial plan and schedule for helping you to become debt free. As a result, your credit counselor will need specific documents showing what debts you owe, how much you pay on those debts, who you are paying and how much you earn. Some of the documents you may need include:

  • Credit card statements showing your current balances, minimum payments, due dates, penalties and fees owed on your credit card accounts;

  • Your cardholder agreements disclosing the terms and conditions on all your credit card debt;

  • Your bank accounts;

  • You pay statements showing your monthly income and the frequency with which you get paid;

  • Your credit report listing all of your current creditors and the status of your accounts;

  • Information pertaining to other secured and unsecured debts you pay every month like payday loans, student loans, auto loans, medical bills or personal loans in order to complete your budget;

  • Other information on your personal finances requested by your credit counselor to negotiate with your creditors.

Begin Payments

When it is time to begin making payments on your Alaska DMP, there are some best practices you can follow to make sure your DMP is a success. First, make all your payments on time. Making even one payment late can void the agreement and cause your creditors to back out. Make the full payment. It is also important that you make the full payment called for in your DMP every month. In addition to possibly voiding your plan, making less than the full payment can cause you to get behind to a point where you may not be able to get back on track. So always make the full payment. If a situation arises where you think you can’t make the full payment contact your credit counselor. They may be able to find room elsewhere in your budget to cover the unexpected expense. A final best practice is to know when your payments are due, how much the payment is, who to make each payment out to, where you can make your payments and what forms of payments are accepted. Waiting until the last minute to ask about one or more of these details can hold up a payment and cause it to be late.

How to Stay Current With Your Alaska Debt Management Plan

Just like we discussed some best practices for making sure your first payment is made on time and in full, there are some best practices you can follow to make sure you stay current with your Alaska debt management plan.

The first thing you can do is be proactive. Make sure you set the due date for your payments when no other large expenses, like your mortgage or car loan, are due. In general, this means always avoid setting it for the first or last day of the month. If your payment is due on an inconvenient date, tell your credit counselor as soon as possible and see if it can be changed. Another best practice for making sure you stay current with your Alaska DMP is to track monthly spending. If you get paid weekly and must put money aside to make large payments, track your weekly spending and make sure you are not spending too much. You can combine this with putting a set amount aside each week to make your DMP payment.

Finally, prepare for unexpected expenses or emergencies. Unexpected expenses include routine car repairs and seasonal increases in your utility bills. Emergency expenses include medical emergencies or weather-related damage. Put aside any unbudgeted income you receive to cover these types of expenses, so you do not have to tap into your DMP payment.

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Alaska Debt consolidation 

Another form of debt consolidation that we mentioned earlier is an Alaska debt consolidation loan. A debt consolidation loan allows you to pay off several other creditors you owe with one new loan. Typically, a debt consolidation loan is an unsecured personal loan with a fixed payment and fixed payoff period. Meaning your payment will remain the same throughout the life of the loan regardless of the balance. Unlike a debt management plan, you will actually have to incur new debt to consolidate your debts with a debt consolidation loan. And you may not be able to get approved for a loan large enough to consolidate your total debt consequently limiting its effectiveness in helping you to become debt-free.

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Alaska Debt settlement

Alaska debt settlement is another form of debt relief often confused with debt consolidation. However, debt settlement is not a form of debt consolidation. Alaska debt settlement does not consolidate your debts and does not pay off your creditors in full. Instead, Alaska debt settlement relies on getting your creditors to agree to accept less than they are owed on the debts you are settling. Not only do you have to have a lump sum of money available to do a debt settlement, but this type of debt relief can be very risky, and have a long term negative impact on your credit report since you must usually be seriously delinquent on your debts before your creditors will agree to settle them for less than they are owed.

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Alaska Bankruptcy

Before entering into any debt relief agreement, you should always consider all your options. One option for individuals who do not have the ability to make regular monthly payments on the debts they owe is Chapter 7 bankruptcy. Bankruptcy legally eliminates your debts, ends all collection activity on those debts and gives you’re a fresh start. Most non-profit credit counseling agencies also provide bankruptcy counseling free of charge. And Upsolve helps individuals who can no longer pay their bills file bankruptcy for free. 

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About the author

The Upsolve Team
Upsolve is lucky to have an incredible team of contributing writers all over the country to help us keep our content up to date, informative, and helpful for everyone who visits upsolve.org!

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