How to Become Debt Free With a Debt Management Plan in Georgia
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In this article, we will look at factors to consider when deciding on a debt relief plan. Then, we will examine alternatives to help you decide if another form of debt reduction might be better for you.
Written by Attorney John Coble.
Updated January 2, 2020
The famous actress, Kim Basinger, was so wealthy that in 1989 she and a few other investors bought over 80% of the town of Braselton, Georgia. Five years later, Ms. Basinger was broke and had to file for bankruptcy. Financial ruin can happen to anyone. Georgians from all walks of life face financial difficulty every day. Some suffer from lack of job opportunities in some of the small towns of the north Georgia mountains. In Atlanta, many suffer the high cost of living. In many of the rural areas of south Georgia, high unemployment is a problem.
A Georgia debt management plan (DMP) is one way of beating financial challenges. You and your credit counselor create your DMP. You and your counselor decide on a repayment plan that you can afford that will pay off your debts in three to five years. The counselor then negotiates a deal with your lenders that makes these lower payments possible. You make one payment monthly to the credit counseling firm. The counseling organization makes this payment to the lenders on your behalf. The counseling agency gets this lower payment for you by persuading your lenders to accept more favorable terms. These terms can include lower interest rates and longer repayment periods. The interest rates for loans are important. A Georgia DMP makes your life much simpler since you will only make one payment for the bills included in your Georgia debt management plan. Your credit score goes down when you start your debt management program, but not as much as with bankruptcy. As your loan balances decrease while paying on your Georgia DMP, your credit score will increase. Your credit score is sometimes referred to as your “FICO score.”
Georgia debt management plans usually only cover unsecured debts such as credit card debt and medical bills. Georgia DMPs usually doesn’t work for payday loans, student loans, and secured loans such as car loans. Your credit card accounts close when you start a debt management program. In most cases, you can still enter into long term debt such as mortgages or auto loans.
Is a DMP the Same as a Debt Consolidation?
A debt consolidation loan combines all included debts into a single lower monthly payment. This is much better than making the minimum payment on several bills. A Georgia debt management plan is a type of debt consolidation. The difference between a debt management program and other types of debt consolidation is that the Georgia debt management plan doesn't involve a new credit. In a Georgia DMP, the counseling organization works as your agent to pay the credit card companies and your other creditors.
Usually, in a consolidation, a new loan or credit card balance transfer pays off the old credit card debt, medical bills, and other unsecured debts. A debt consolidation loan may be the better choice for people that still have good credit. A good credit score will allow them to get a favorable loan to pay off their consolidated debts. A consolidation loan also allows them to keep some or all their old accounts open. This allows them the flexibility of using these accounts in the case of an emergency.
How to Become Debt Free With a DMP in Georgia
In this section, we will look at factors to consider when deciding on a debt relief plan. Then, we will examine alternatives to help you decide if another form of debt reduction might be better for you.
Find a Credit Counseling Agency
To make sure you are working with a reputable nonprofit credit counseling agency, it is a good idea to make sure the agency is a member of the National Foundation for Credit Counseling (NFCC). The NFCC is the largest and oldest nonprofit credit counseling organization. To be a member of the NFCC, the Council on Accreditation (COA) must accredit the counseling agency. Note that credit counseling is sometimes referred to as financial counseling. Always ask about the cost of a credit counseling session before signing up. The initial session should always be free. If the first session isn’t free, think twice before using this agency. Ask what documents you need to bring to your first session.
It is important to know how your counselor is being paid. If a counselor receives a bonus for signing up new users, you shouldn’t use this agency. In these cases, the counselor may sign you up because it puts money in their pocket not because it’s the best course of action for you. It is normal to pay a nonprofit credit counseling agency for Georgia debt management plans and some other services beyond basic credit counseling. It isn’t normal to pay for basic credit counseling. The credit counseling agency must charge some fees for extra services so it can pay its employees. This legitimate compensation doesn't put the counselor in a position where they may make extra money for signing you up for a service that you don't need.
What to Expect at Credit Counseling
You will need your recent pay stubs, bills from each lender, and your banking statements when you meet with your credit counselor for the first time. Having a copy of your credit report with you can also be helpful at this meeting. You may meet your counselor at the office of the credit counseling agency. Telephone meetings are also common. Web meetings with counselors are becoming more common. The typical initial credit counseling session takes forty-five minutes to an hour. You will work with a trained and certified credit counselor to assess your income, expenses, and debts. Expect your counselor to pay particular attention to the interest rates on your bills. After the assessment phase, you and your counselor develop an action plan to achieve your financial goals. Everything at this initial credit counseling session is confidential. Your lenders are in no way involved at the initial credit counseling session. Your initial session will end with your counselor making a recommendation for the best debt relief option for you. One of these recommendations may be a Georgia debt management plan.
Making the Decision & Getting Started
You have the right to take your time and consider your debt-relief options. It isn't a good sign if the credit counselor pressures you to make an immediate decision. A good nonprofit credit counseling agency will not press you to make a decision that you are uncomfortable with. You need to give careful consideration to your choice of a debt solution. Can you stick to the budget that would be necessary for a particular debt reduction plan? If the plan fails, you will often be in a worse position than had you not entered into the plan. Can you and your family make the necessary sacrifices to make the plan succeed? Have you considered all available debt solutions? Have you considered bankruptcy? Have you met with a bankruptcy attorney?
Put Together Your Georgia Debt Management Plan
If you decide to use a Georgia debt management plan, you will need more detailed information at the session where you set up your plan. Getting your DMP set up right is important. Only paying your monthly payments on time is more important. You will need to provide detailed information for the lenders that you include. You will need your credit card bills, medical bills, and bank account statements. At this meeting, you will fine-tune the details of your debts. You will make sure that any expenses you may have forgotten at the initial session are in your budget. You will also make sure that the payment due date is one that works for you.
Make sure that you know what your monthly payment will be. Make sure that you know what part of your monthly payment will be the monthly fee paid to the credit counseling organization. You need to know when the counseling organization will start making payments to your creditors. Ask your counselor if you should continue to make payments on your monthly bills during the time between the start of the plan and the date the creditors accept your plan. Paying these bills during this time could cause you to make a double payment but not paying the bills during this time could have a negative impact on your credit report. Your counselor will make a recommendation whether these bills should be paid or not based on your specific financial situation.
After your debt management program begins, always make your payments on time if not early. Use the first few months of your plan to get used to following your budget. The credit counseling agency will contact your lenders to reach agreements with them after you start making payments on your Georgia DMP. Credit counseling agencies have relationships with most lenders. Due to their experience with the lenders, they should be able to give you an idea of how long this process should take. Stay in contact with your credit counseling firm to stay informed about your plan. Check with the agency to find out when all the creditors have accepted your plan.
How to Stay Current With Your Georgia Debt Management Plan
To have a successful Georgia debt management plan, it's a good idea to make sure that your due date for the DMP doesn't fall on the same date when other large bills are due. Make sure to set aside funds to cover expected expenses that don't occur monthly, like car maintenance. Only after setting aside funds for these expenses, consider how much you have left for your variable monthly expenses like shopping and dining out. Pay close attention to the monthly reports your counseling organization sends you about your DMP. You need to know who is getting paid and how much they are getting paid. After you have accumulated enough in your emergency fund, it is a good idea to make extra payments when possible. This will help to keep you from falling behind in the future and may allow you to finish your Georgia DMP early. If you have an emergency and can't make your payments, contact your credit counselor. They will have recommendations for what you can do.
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Georgia Debt Consolidation
A Georgia debt consolidation uses a loan to consolidate your debts. A Georgia DMP uses a credit counseling agency to consolidate your debts without a loan. This is the difference in a consolidation and a DMP. There are a few types of debt consolidation loans such as unsecured personal loans, credit card balance transfers, and home equity lines of credit. A debt consolidation is a good option for those who have good credit and can get their debt consolidation loans at a lower interest rate. When using a consolidation loan, it is tempting to use your old credit cards. Using these cards will add to your total debts and add to your debt payments.
Georgia Debt Settlement
One risk of a Georgia debt settlement is that the lenders won’t settle. Another concern is that many debt settlement companies aren't trustworthy. It is a good idea to check any debt settlement company’s rating at the Better Business Bureau. To become debt-free, every creditor has to agree to your proposals. A major problem with debt settlements is that you will have to include the difference between the loan balance and the settlement amount as income on your tax return. This is even though you have received no money.
If you don’t think one of the other debt-relief options can work for you, it makes sense to consider Georgia bankruptcy. If you can't afford to hire an attorney, you may qualify for a free Chapter 7 bankruptcy through Upsolve. If your case does require an attorney, we can help you find a qualified bankruptcy attorney in your area. If you are having to choose between paying debts or taking care of your family, you need to consider bankruptcy. Your family is more important than any creditor.