How to Become Debt Free with A Debt Management Plan in Washington D.C.

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Written by Upsolve Team.  
Updated February 19, 2020

Summary

If you are ready to get out of debt and rehabilitate your personal finances, you can start to work towards becoming debt-free with a debt management plan in Washington, D.C. The rest of this article gives you detailed steps you can take today to get started.

If you live in Washington, D.C. and your monthly income is being outpaced by your monthly bills, you may be weary with the anxiety you suffer every month as you try to decide what bills to pay and when to pay them. A Washington, D.C. debt management plan may be able to help you even the odds with your creditors again.

A Washington, D.C. debt management plan is a form of debt consolidation achieved through a non-profit credit counseling agency. It allows you to make one predetermined monthly payment to the credit counseling agency which then uses those funds to pay your creditors per the terms of your DMP. Some benefits of a debt management plan include: 

  • Your non-profit credit counselor may be able to negotiate with your creditors to get a lower interest rate on your consolidated debt;

  • You can consolidate unsecured debts even if you have bad credit and do not qualify for favorable loan terms or a credit card balance transfer;

  • You can do away with having to keep track of multiple debt payments - one payment per month covers everything;

  • It puts you on a clear trajectory to being debt-free;

  • You may get out of debt faster than merely making your minimum monthly payments as per usual 

A Washington, D.C. debt management plan is not without its risks. Like any money management program, there is always the risk of being scammed if you do not choose to work  with a reputable, accredited and licensed non-profit credit counseling agency. Your credit score may also initially be affected when you enter a debt management program if your lines of credit are closed. However, your credit score will usually go back up as you pay off the debts included in your plan.

Is a Washington, D.C. Debt Management Plan the Same as Debt Consolidation?

Debt consolidation is a general term that includes both securing debt consolidation loans and entering into debt management plans. You can choose to pursue debt consolidation in several different forms: an unsecured personal loan, a credit card balance transfer, a home equity line of credit, or a debt management plan. Debt consolidation results in full repayment of existing debt, often at better terms, without a new loan or reduction in principle. 

Regardless of what type of debt consolidation you choose, any reputable credit counselor will warn you that debt consolidation is not without its risks. Some of these risks are the same whether you opt for a debt consolidation loan or a debt management program. Other risks are unique to one or the other. For example, if you opt for a debt consolidation loan, there is the risk of achieving no actual savings if the interest rates on your current debts are comparable to those of your debt consolidation loan. On the other hand, if you opt for a debt management program, there is the risk of not being able to stick to the plan over the long term, and ultimately making your financial situation worse.

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How to Become Debt Free with A Debt Management Plan in Washington D.C.

If you are ready to get out of debt and rehabilitate your personal finances, you can start to work towards becoming debt-free with a debt management plan in Washington, D.C. The rest of this article gives you detailed steps you can take today to get started.


Find a Credit Counseling Agency

The first step in creating a Washington, D.C. DMP involves getting in touch with a reputable non-profit credit counseling agency. A non-profit credit counseling agency can walk you through the debt management plan process without pressuring you into a program that may not be right for you. And because they abide by industry standards of accreditation, they guarantee transparency and full and fair disclosure throughout the entire process.

You can verify that the non-profit credit counseling agency you choose is accredited by visiting the website of the National Foundation for Credit Counseling (NFCC), one of the largest and longest serving non-profit financial counseling organizations in the United States. Another reputable organization you can check with is the Council on Accreditation (COA).  

To obtain free non-profit credit counseling today contact CESI, Money Management International or Greenpath. To find more accredit non-profit credit counseling agencies in your area contact Upsolve.

What to Expect at Credit Counseling

What you can expect at credit counseling depends on how you choose to obtain your free initial credit counseling session. You can take part in free non-profit credit counseling in-person, over-the-phone or online. If you live somewhere remote or prefer not to travel for your session, you can complete the session online. Alternatively, you may request a call from a live credit counselor who will conduct the entire session over the phone. Finally, if you prefer to do the session in-person, you will usually have to make an appointment. 

Regardless of how you pursue credit counseling, you will be asked a series of personal finance questions about your debts, income, and expenses. At the end of the session, you will receive a recommendation, based on the information you have submitted, for ways to achieve your personal financial goals. This personalized action plan may include a recommendation to pursue debt consolidation. In addition to the free credit counseling, you will have an opportunity to obtain some free educational materials 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

Making the decision to enter into a Washington, D.C. debt management plan is about more than just financial figures and numbers. Some of the questions you should consider before making the decision to get started with your Washington D.C. DMP include:

  • What questions do you have that have not been answered?

  • Will you be able to stick to your budget? If you are not sure if you can, then let your credit counselor know before you start a Washington D.C. DMP.

  • Have you explored all your options? There are many ways to do debt consolidation. If you feel a DMP is not right for you, do not start one.

  • Are you aware of all the fees you will be charged by your credit counseling agency? Set-up fee? Monthly fee? Costs? If not, ask for a detailed list.

  • Do you have other debts that you would like included in the plan but are not? If so, ask your credit counselor why not and about how to address those debts moving forward. 

Put Together Your Washington, D.C. Debt Management Plan

Your certified credit counselor will be responsible for doing most of the work of putting together your Washington, D.C. debt management plan. However, in order for them to get you the best terms possible for your plan, you will need to provide them with some specific financial information. Most commonly this includes: 

  • Your credit card bills. These should include your interest rates, minimum payments, due dates, penalties, late fees and current balance.

  • Your cardholder agreements with the terms and conditions on all your credit card debt.

  • Your personal bank or credit union account information.

  • Your earnings statements that include your monthly income and how often you get paid.

  • Your personal credit report which will show your total debt, your current creditors and the status of your accounts.

  • Details about any other debts or obligations you pay every month like student loans, payday loans, medical bills or personal loans.

Your credit counselor will use the information you give them to contact each of your creditors to establish the plan benefits and obtain each creditor’s acceptance. While they are doing this, you will be provided with updates during the set-up process and you can refer any creditor inquiries to your credit counselor.

Begin Payments

All of the hard work you have done to date to put together your Washington, D.C. debt management plan will come to fruition when it is time to begin making payments. It is imperative that you get off to a good start when you begin making your Washington D.C. DMP payments, not only to protect your plan but to inspire and reassure yourself that you have made the right decision. First of all, make sure you know when your first payment is due, how much the payment is, and who the payment should be made out to. Even if all of your creditors have not yet signed off on your Washington D.C. DMP, you can begin making payments through your credit counseling agency early if you’d like. Another thing you can do while you wait for more creditors to sign on to your plan is to take the early weeks to really set up a process for following your budget and making sure all your other expenses are getting paid in addition to your new debt management plan payment every month. That way, you’ll know that your ability to make your required payments is reliable. 

How to Stay Current with Your Washington, D.C. Debt Management Plan

Once you begin making your Washington D.C. DMP payments, the best way to stay current with your plan is to set up an automatic draft or to make your payments early. There are no pre-payment penalties that will be levied by either your creditors or your credit counseling agency, so if you are able to make extra payments, or receive an unexpected lump sum of money you want to apply to your debt, you are free to accelerate your repayment plan at any time. In addition to making payments early and paying extra when you can, make sure the date your payment is due does not fall on the same due date as any of your other large monthly expenses.

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Washington D.C. Debt Consolidation

Washington D.C. debt consolidation works in many of the same ways that a Washington, D.C. debt management plan does. However, instead of dealing with a non-profit credit counseling agency, you must obtain a new line of credit from a private lender or credit card company, to accomplish non-DMP debt consolidation. Because you are dealing with a private lender, you will need good to excellent credit to get approved and the loan may not necessarily come with a lower interest rate and lower monthly payment than you had before. By contrast, when you pursue debt consolidation with a Washington D.C. DMP, your credit counselor acts as your advocate to get you the best terms and concessions possible from your unsecured creditors for your Washington, D.C. debt management plan.

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Washington D.C. Debt Settlement

Washington D.C. debt settlement is a form of debt relief that relies on either you or a third-party debt settlement company convincing your creditors to settle your past due accounts for less than you owe them. Debt settlement is one of the riskiest forms of debt relief because many debt settlement companies use promises of only paying pennies on the dollar to settle your past due debts as a lure to scam or take advantage of you. Debt settlement is only really effective if all your creditors agree to settle your debts and you have a lump sum of money to give to them when they do.

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Washington D.C. Bankruptcy

Whether you can afford a Washington, D.C. debt management plan or not, you should not be forced to suffer due to debt you cannot pay. A Washington D.C. bankruptcy can legally eliminate your eligible debts either outright or after you complete a 3-5 year repayment plan. You can consult with a competent bankruptcy attorney to get advice on the best type of bankruptcy for your financial situation. If you cannot afford to hire an attorney but have been advised that you are a good candidate for a Chapter 7 bankruptcy, then Upsolve may be able to help you file for debt relief for free.

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