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

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In a Nutshell

Now that you are aware of what an Arizona DMP is and how it works, it’s time to learn how to get started. To better determine whether entering into a DMP is the best option for your situation, you’ll need to meet with a reputable credit counseling agency.

Written by Upsolve Team
Updated February 25, 2020

An Arizona debt management plan is a form of debt consolidation that combines various kinds of unsecured debt into one account. You then make a single payment every month to a non-profit credit counseling agency, which then distributes your single payment to your numerous creditors. There is no minimum credit score required to qualify for a debt management plan and if completed successfully, the debt management plan will pay off all of your consolidated debt in three to five years.

The primary benefit of an Arizona debt management plan is that it allows individuals who are not generally eligible to secure debt consolidation loans, to consolidate their unsecured debts into one account, paid via single affordable monthly payments. In addition to the convenience and ease of having one single monthly payment for your consolidated debt, your non-profit credit counselor will also negotiate on your behalf, to get your creditors to lower your interest rates and waive over-the-limit and late fees whenever possible. After your debt management plan is set up, your non-profit credit counseling agency may charge you a small one-time setup fee, in addition to a small monthly maintenance fee. Both of which can likely be waived, upon request, if you cannot afford them.

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

An Arizona debt management plan is a form of debt consolidation. Debt consolidation works by combining numerous debts into one account. This account is then paid monthly. There are several different forms of debt consolidation, one of which is an Arizona debt management plan. An Arizona debt management plan is set up by an accredited non-profit credit counseling agency that combines all your payments into one account. Oftentimes, credit counselors can negotiate a lower interest rate and lower overall monthly payment than you’re paying on your debts now. Most debt management programs will also waive over-the-limit and late fees and re-age past due accounts to a current status.

Pursuing debt consolidation via a loan is accomplished by taking out a new line of credit and using it to consolidate as much of your debt as you can via a balance transfer. A new line of credit can take the form of a personal loan, refinancing your mortgage, a home equity line of credit, or a credit card balance transfer. All of these forms of debt consolidation require some form or credit approval, meaning they are not a good option if your credit score is poor. In addition, some may not offer a lower interest rate or lower monthly payment. As a result, many Arizonans prefer the DMP approach to debt consolidation. 

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

Now that you are aware of what an Arizona DMP is and how it works, it’s time to learn how to get started. To better determine whether entering into a DMP is the best option for your situation, you’ll need to meet with a reputable credit counseling agency.

Find a Credit Counseling Agency

Finding a reputable non-profit debt management agency is perhaps the most important step in becoming debt-free with an Arizona DMP. In the State of Arizona, all debt management companies are required to be licensed and bonded. Non-profit credit counseling organizations are exempt from the licensing requirements provided they are (a) bonded; (b) organized to render financial planning service or debt management service to the public, and (c) do not collect any compensation directly or indirectly from debtors. You can verify that the credit counseling agency you are dealing with is licensed through the Arizona Department of Financial of Institutions.

In addition to verifying that the credit counseling agency you choose to work with is licensed, you should make sure you are dealing with an accredited non-profit credit counseling agency. Reputable non-profit credit counseling agencies do not charge for an initial credit counseling session and will not try to talk you into a debt management plan you cannot afford. You can find out if a non-profit credit counseling agency is accredited by checking with the National Foundation for Credit Counseling (NFCC) or the Council On Accreditation (COA). For more information, check the Arizona Attorney General and Better Business Bureau to see if any complaints have been filed against any agencies you’re interested in working with.

Three nationally accredited, non-profit credit counseling agencies, trusted by Upsolve, that provide non-profit credit counseling free of charge in Arizona are Money Management International, CESI, and GreenPath. All are licensed in the State of Arizona. To learn about other accredited non-profit credit counseling agencies in your area, feel free to contact Upsolve.

What to Expect at Credit Counseling

What you can expect from your initial credit counseling session will depend, in part, on how you choose to conduct the session. Many credit counseling agencies offer credit counseling in-person, over the phone and online. Once you decide how you would like to conduct your session, it will begin with your credit counselor getting some basic personal and financial information from you. Your counselor will generally want to learn how much you earn, who you currently owe, and how much you owe them and what led to your current financial situation. Using this information, your credit counselor will construct a personalized action plan designed to help you reach your financial goals. Your counselor’s recommendations may include a DMP. 

Note that nothing you share at your credit counseling session will be reported to any credit bureaus and none of your creditors will take part in the session.

Making the Decision & Getting Started

When you have completed your initial credit counseling session, you will probably have a lot of information to process and you won’t yet be ready to make up your mind about whether you’d like to enter into a DMP. Much of the information you received you may have heard for the first time. It is normal and understandable to need time to process this kind of information. Even if you are a good candidate for an Arizona DMP, you should consider your options carefully before committing to a plan of action. 

You may also need access to even more information before deciding to move forward with a DMP. Don’t ever hesitate to reach out to the agency you’re working with if you determine you have more questions. For example:

  • What’s the set-up fee and how much is the monthly fee?

  • Is your counselor paid on a commission basis or do they have another incentive to steer you towards one option or another?

  • And what kind of relationship does the credit counseling agency have with your creditors?

Not only should you not be afraid to ask these questions, your credit counseling agency should welcome them. If you are apprehensive about asking them in person or worried about offending your credit counselor, send them the questions in an email. Don’t make up your mind until all of your questions are answered.

If in the end, you just don’t feel an Arizona DMP is a good option for you, ask your credit counselor about potential financial management alternatives, like bankruptcy counseling. You could also choose to contact a competent bankruptcy attorney on your own and speak with them about your options.

Put Together Your Arizona Debt Management Plan

If you do make the decision to move forward with an Arizona debt management plan, it is very important that the information related to the plan is accurate and that the structure of the plan is as feasible as possible. In order to ensure this is the case, your credit counselor will need some documents from you before they begin to negotiate with your creditors. Confirming your financial details through assessing these documents will help your credit counselor construct a plan that makes sense for you and to secure you favorable terms. Some of the documents you should locate and copy to provide to your credit counselor may include:

  • Credit card bills.

  • Credit card cardholder agreements.

  • Bank or credit union accounts;

  • Earnings or pay statements.

  • A recent credit report.

  • Other debts you pay every month like medical bills, personal loan payments, payday loans, student loans and auto loans.

Depending on the particulars of your financial situation, your credit counselor may need other information pertaining to your personal finances in order to better negotiate with your creditors.


Begin Payments

Once you have put together your Arizona debt management plan, you should immediately shift your focus to making your plan payments on time. Your certified credit counselor will begin contacting your unsecured creditors on your behalf and obtaining their consent for the plan. But you should not wait until all your creditors have signed off on your Arizona DMP before making your payments if your agency tells you to start making them sooner. The reason? Your agency will do its best to make sure that your accounts don’t incur late fees, etc. as they’re negotiating with your creditors. To facilitate that goal, you’ll need to begin making payments as soon as your agency requests them. Not only will this effort encourage more of your creditors to sign off on your Arizona DMP, it will keep those who have already agreed to it from backing out.


How to Stay Current with Your Arizona Debt Management Plan

In addition to getting off to a good start by making your first payments on time, staying current with your Arizona debt management plan is a crucial factor in ensuring that your DMP is ultimately successful. A good way to make success more likely involves making sure your plan payments are not due on the same day of the month as other large expenses like your rent or car loan. If they are, ask your credit counselor if the due date can be changed.

Another preventive measure you can take involves making extra payments on your plan when you are able to. Even though your payment amount due should remain constant during the life of the plan, if you make extra payments, your plan account will always have funds available for your credit counselor to distribute to your creditors, even if you fall on hard times and need to skip a payment cycle down the road. 

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Arizona Debt Consolidation

If you’d prefer not to work with a credit counseling agency as a “middle man,” you can accomplish the debt consolidation process by securing a Arizona debt consolidation loan. This form of debt consolidation allows you to pay off your existing debts (any you like, even those that can’t be consolidated under a DMP) by using a new line of credit as a balance transfer. Note however, that if you have poor credit, you are unlikely to qualify for a consolidation loan with favorable terms. Individuals with poor credit tend to benefit more significantly from DMPs in this regard. 

Arizona Debt Settlement

Arizona debt settlement is a service often offered by third-party, for-profit debt settlement companies. Debt settlement is not a form of debt consolidation and unlike Arizona debt management plans, relies exclusively on getting your creditors to accept less than they are owed on your debts. Debt settlement plans are risky because most creditors will not even consider a debt settlement until you are seriously delinquent on your account. Even when successful, the debt settlement company is likely to keep a large portion of your savings in fees and costs. If you have a large sum of money available to offer to your creditors, you may want to consider this option, but do your homework on this debt relief alternative before committing to it. 

Arizona Bankruptcy

Even the most favorable debt management plan requires that you have reliable, sufficient income to make payments on the plan for an extended period of time. If you are unemployed, sick, struggling to make ends meet, or only working sporadically, an Arizona bankruptcy may be a more realistic alternative for you. Bankruptcy eliminates eligible debts you can no longer afford to pay, even if you are unemployed or have no income. If you feel an Arizona debt management plan is not a realistic option for you, ask your non-profit credit counselor about bankruptcy counseling. To get more information on bankruptcy and how it works, contact Upsolve.

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