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

Find a Credit Counseling Agency

Finding a reputable non-profit debt management agency is perhaps the most important step in becoming debt-free with a Colorado DMP. In Colorado, like most states, “[a]ny person or organization that provides, offers to provide, or agrees to provide Debt-Management services directly or through others must register as a Debt-Management Services Provider.” You can verify the credit counseling agency you are considering is licensed and view its disciplinary history, if any, here.

Even if the credit counseling organization is licensed, you should also verify that you are dealing with a non-profit organization that is accredited by a national accreditation organization like the NFCC. 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. These standards are designed 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 locate any accredited non-profit credit counseling agencies locally, there are several nationally accredited non-profit credit counseling agencies you can contact such as Consumer Education Services Incorporated (CESI ) or GreenPath, both of which are licensed in the State of Colorado. 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

What to expect at your initial credit counseling session depends on whether you do the session in-person, over-the-phone or online. Most credit counseling agencies offer all three. If you do the session in-person, you will meet with a certified credit counselor and go over your financial situation with them. They will discuss your income, your debts and your overall financial circumstances that may have led to your financial difficulties. They may also offer to review your FICO credit score and credit report with you. At the end of the session they will provide you with a personal recommendation of debt solutions that would be best for you. An over-the-phone session might be with a live credit counselor or it may be automated. If it is with a live credit counselor, it will be conducted pretty much as an in-person session. If it is automated, or online, then you will be answering a series of questions about your financial situation and be given a recommendation at the end of the session. No matter which method you prefer, your initial credit counseling session should always be free.

Making the Decision & Getting Started

Once you have taken advantage of your free initial credit counseling, you should be in a better position to know if a Colorado debt management plan is right for you. Before making the decision and getting started ask yourself a few questions:

• Did you get all your questions answered? If not, write down the questions you still have and contact your credit counselor again.

• Were you provided with free educational material to read and review? The answer to this should be yes. And you should always take the time to read all the material pertaining to the plan you are choosing before getting started.

• Have you discussed your debt management repayment plan with your family? Starting a Colorado DMP is a long term commitment. Your plan will likely extend from three to five years. Your family should understand and support the fact that you will not be able to run up new debt or open new credit during this time.

• Were all the monthly fees, set-up fees and costs disclosed to you? If not, ask for the specific fees and costs that are part of the debt relief program you want to go with. Also let your credit counselor know if you feel you can’t afford some of the fees and costs. If you qualify, many credit counseling agencies will waive them if you ask.

Put Together Your Colorado Debt Management Plan

It is now time to work out the specific details of your Colorado debt management plan. In order to do this, your credit counselor will need some important documents showing how much you owe, who you owe, what you pay on what you owe and how much you have to make that payment every month. While much of this will be the same information you discussed at your initial credit counseling session, you will now need to document that information so that it can be incorporated into your personalized Colorado debt management plan. Some of the documents you may need include:

• Credit card statements showing your current balances, interest rates, 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;

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

• Your credit report showing your total debt, 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

After you have put your Colorado debt management plan together, your credit counselor should tell you when to start making your payments. Make sure you know when your first payment is due, how much the payment is and who to make the payment out to. Also, make sure you know when to stop paying your creditors directly, if you haven’t already done so. If all of your creditors have not agreed to your Colorado DMP when your first payment due, you may have to keep paying some of them until they do. Don’t be reluctant to ask your credit counselor which creditors have agreed to your DMP and which have not. In the meantime, you should continue to make all your payments on time and in the full amount due, if possible. Missing payments or not paying the full amount agreed to can put you in a worse situation than you were in before.

Once you begin your Colorado DMP you should also expect to see a decrease in your credit score. This is because your creditors will close your open accounts with them when they accept your Colorado DMP, and this will result in less available credit. However, as you make your payments and the balance in your DMP goes down, your credit score should gradually increase again.

How to Stay Current With Your Colorado Debt Management Plan

Once you have made your first payment on your Colorado DMP, it is just as important to stay current with your future payments. You can perform a few safety checks once your DMP is underway to make sure you are poised for success. First of all, make sure your monthly payment is due on a date when no other large monthly expenses come due, like your car loan or mortgage payment. If it does fall on the same date, see if your credit counselor can change it. Second, set up a system to keep your credit counselor in the loop if anything changes with your monthly expenses/income. For example, if part of your pay includes commissions and you know a slow period of the year is coming up, tell your credit counselor and see if you can pay extra before it arrives. Finally, prepare for unexpected expenses and emergencies. Ideally, your budget allows you to set aside something every month to cover these. If it does not, set aside unexpected income from things like commissions, end of year bonuses, gifts, and tax refunds to cover them.