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

Find a Credit Counseling Agency

Your first step in becoming debt-free with your own Alabama DMP is to get in touch with a reputable non-profit credit counseling agency. Using a non-profit credit counseling agency, as opposed to a for-profit debt management company, is important because non-profit credit counseling agencies have to abide by national standards of accreditation. These standards include transparency and full and fair disclosure of every aspect of the Alabama DMP. Finally, non-profit credit counseling is provided free of charge through a number of accredited nonprofit credit counseling agencies such as Money Management International, CESI or GreenPath. For help finding an accredited non-profit credit counseling agency in your area feel free to contact Upsolve.

Additionally, you can visit the National Foundation for Credit Counseling (NFCC ) or the Council On Accreditation (COA) to verify the accreditation of any non-profit credit counseling agency. COA does the accrediting, while the NFCC is the largest and longest-serving nonprofit financial counseling organization in the United States. Its member agencies all have to be NFCC certified.

What to Expect at Credit Counseling

You will begin your credit counseling by meeting with a trained and certified credit counselor. Working with your counselor they will help you:

• Assess your personal finances, including income, expenses, and debts;

• Establish financial goals for both the short-term and the long-term;

• Review your credit report; and

• Develop an action plan to achieve those goals. 

You will leave each session with a budget and an action plan. When applicable, your counselor will also provide educational materials and referrals to additional resources and services. Each person’s financial situation is unique and so each counseling session is tailored to meet your specific needs. But typically a full counseling session lasts 45-60 minutes.

Making the Decision & Getting Started

Even if you have only a few minutes to spare, if you are looking for help getting out of debt and putting an end to annoying collection calls, simply set up an initial credit counseling session and start the conversation. You are under no obligation after meeting with a counselor to start a debt management program. Even if the counselor says you qualify for or are a good candidate for an Alabama DMP, you have the right to take your time to think about it before making a decision. Starting a debt management plan is not an easy decision to make. You are making a long term commitment to yourself to be debt-free. Before making up your mind some of the questions you may want to ask yourself include:

• Are you already behind on your credit card payments? Or other debt payments?

• How do you feel about the budget? Do you think you can stick to it? 

•  Are you and your family ready to make this commitment? If the plan fails because you miss a payment, you will likely be worse off than before due to penalties, default interest rates kicking back in, etc.

• Have you considered other debt solutions? Have you spoken to a bankruptcy attorney about whether bankruptcy might be a better alternative for you? 

Put Together Your Alabama Debt Management Plan

Assuming you have made up your mind to be debt-free. Let’s discuss what you will need to put together a successful Alabama debt management plan with your non-profit credit counselor. In order to create your debt management plan and get it agreed to by your creditors, your counselor will need more specific information than you may have given them during your credit counseling session. This information includes your bank account information, your detailed credit card account information and the amount and frequency of your pay. Your credit card statements should contain most of the information you need such as your current balance, minimum monthly payment, annual interest rate, due date, late fees, over-the-limit fees, and other monthly fees assessed on your accounts. You may also be able to obtain most of this by obtaining a free copy of your annual credit report. 

My credit counselor says I need to provide my cardholder agreement for all of my credit cards. What does that mean and how I can get them?

Your cardholder agreement is the agreement you entered into with all of your creditors when you obtained credit from them. Your counselor will need this information to make sure they have all the relevant details about your credit card account when they contact your creditors. You should have received a printed copy of your cardholder agreement when you received your credit card. If you opted for electronic notification, then an electronic copy of the agreement should have been emailed to you as a PDF or is available to download online. If you have lost your printed copy or no longer have access to your account online, you can get a current example of your cardholder agreement here. 

Begin Payments

Perhaps the most important step in your Alabama DMP is making your first payment. Most debt management plans require that you make your first payment on time and in the full amount required. If you do not, your creditors may not agree to the plan. If you have not done so already, make sure you know the date your first payment is due and the amount of the payment. If either is unclear, talk to your counselor. One good way to make sure your payments are made on time and that you have the money needed to make the full payment is to make your payments early. Use the early weeks of your Alabama DMP to really set up a process for following your new budget and making sure all day to day expenses are getting paid every month in addition to your debt management plan payment.

How will I know if my creditors accept the DMP? 

Your counselor will let you know when your creditors have agreed to your Alabama debt management plan. Once you’ve signed off on the plan and are starting to make payments, your credit counseling agency will contact your creditors to set up the plan with them and get an agreement in place. Most reputable credit counseling agencies have established relationships with many banks/lenders, so they should have an idea of approximately how long your process will take. While you wait, continue making your monthly debt management plan payment and stay in communication with your credit counselor. If you want to get per-creditor updates, talk to your credit counselor about this, so all of you’re on the same page. 

How to Stay Current With Your Alabama Debt Management Plan

It can’t be stressed enough how important it is that you stay current with your Alabama debt management plan and make all the required payments on time and in the amount required. Here a few ways to make doing so easier. One important factor in determining whether you’re able to make your debt management plan payment on time every month is the due date. Try to set up a due date when no other large expenses need to be paid. In addition, avoid setting your due date on the first of the month when expenses like your rent or mortgage payment become due. Finally, make sure to keep your credit counselor in the loop if anything changes in your monthly expenses/income and you need to change your due date. 

Set up a system to set aside funds that are budgeted to cover an expected one-time expense. 

As part of your budget, you should have accounted for expected one-time expenses that become due every year or more often. Some examples of these types of expenses include vehicle registration, school tuition, quarterly car insurance or taxes. In addition to including them in your budget, set up a system to set aside funds to pay these types of expenses before they become due. You might open a separate bank account and have the funds directly deposited into that account from your paycheck every month. You could also pre-pay them and have the merchant apply the funds when they become due. Or you could set aside extra income like a bonus or tax refund to pay them when they become due.