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

Find a Credit Counseling Agency

There are a few steps you can take to make sure you hire a reputable credit counseling agency. First, make sure they are members of the National Foundation for Credit Counseling (NFCC). The NFCC is the longest-serving nonprofit credit counseling organization in the US. NFCC member agencies have to accredited by the Council on Accreditation (COA). The COA has strict standards for firms that it certifies.

A key part of finding a good financial solution is to find a good credit counselor. It’s a good idea to check any agency's rating with the Better Business Bureau. You can also check the Massachusetts Attorney General's Office consumer complaint database here. Note that the attorney general's site is difficult to use and you can only see how many complaints a company has. If a company has had many people complaining to the attorney general, it's not the credit counseling firm you want to deal with.

Ask a few common-sense questions about the credit counseling company. Ask what they do if a person needs their services but can't afford the services. Most reputable nonprofit credit counseling agencies will waive the fee for qualifying clients. How the credit counseling firm answers this question will show you if the counseling agency is more concerned about its clients than its bottom line. Those credit counseling companies that do waive fees for those who can't afford the fees are the type of credit counseling firm that you want. Ask the counseling agency if there is any free promotional material for the agency. Most reputable agencies will have such material so you will understand more about what they do. If a firm doesn't have such materials, it is a bad sign.

What to Expect at Credit Counseling

At your first credit counseling session, you and your credit counselor will conduct a general overview of your finances. The session will take forty-five minutes to an hour. At this first meeting, the information you share with your counselor is completely confidential. Your lenders aren't notified of this meeting. Your certified credit counselor will work with you to assess your monthly income, your monthly expenses, and your debt. Your counselor will examine your recent paycheck stubs to determine your monthly income. Your counselor will look at your credit card bills to see what your interest rates are and what your minimum payments are. Your counselor and you will establish your short-term and long-term financial goals and develop a plan of action to achieve these goals.

Making the Decision & Getting Started

Before choosing a Massachusetts debt management plan, there are questions to ask your counselor. Ask what the set-up fee is and how much the monthly fee is. These fees are often built into your monthly payments. These fees are important because they do not decrease your debt but instead, only pay the credit counseling firm. Of course, even though the credit counseling agency is nonprofit, it still needs this money to pay its employees. You need to make sure you can afford their fee and that their fee is competitive with the fees of other credit counseling companies. 

Find out how the credit counseling firm pays its credit counselors. If they pay their counselors a commission or pay incentive bonuses, this is a bad sign. In these cases, the counselors may put their own interest above your interest to get the bonus. They may put you into a debt solution that isn't the best debt relief option for you.

Before committing to a Massachusetts DMP there are a few questions to ask yourself. Have you considered all your debt relief options? Have you met with a bankruptcy attorney? Most bankruptcy attorneys offer a free initial consultation. It may be a good idea to explore this solution too.

Put Together Your Massachusetts Debt Management Plan

In the credit counseling session to create your Massachusetts debt management plan, your counselor will need more detailed information than they needed in the initial credit counseling session. You will need detailed bank account information and detailed credit card information. Your counselor will want the agreements that you have for each of your credit card accounts. These credit card agreements are the "terms" that you received in the same envelope that your card came in. Your counselor needs this credit card agreement to have a complete understanding of the terms. Remember that your counselor will negotiate more favorable terms for you. To get more favorable terms such as lower interest rates, the counselor must know the original terms.

If you don't have your credit card agreement anymore, you aren’t alone. Most people lose or throw away this paperwork. Luckily, you can get a copy of your agreement at the Consumer Financial Protection Bureau's Credit Card Agreements Database.

Once you and your counselor have put together your Massachusetts debt management plan, the credit counseling firm will contact your creditors and begin to negotiate better terms on each debt. 

Begin Payments

In a Massachusetts debt management plan, making your payments on time is the most important thing you do. If you are unclear about when your payment due date is or the amount of your payment, ask your credit counselor. Two-way communication between you and your counselor is key to a successful DMP.

As you begin your Massachusetts DMP, you will notice that it has a negative impact on your credit report. This is because the lenders you include close your accounts when you start a DMP. Not having these accounts open gives you less available credit. When the balances on the accounts included in the Massachusetts DMP decrease, your credit score will increase. Credit card companies place a notation of the DMP on your credit report. This notation will have little impact on your score.

How to Stay Current With Your Massachusetts Debt Management Plan

When setting up your Massachusetts debt management plan, it's a good idea to set your due date for a date when large payments such as rent aren't due. Throughout your debt management program, keep your credit counselor in the loop when it comes to changes in your monthly income and your monthly expenses. Your counselor will often have a solution should these changes hurt your ability to reliably make your DMP payments.

Each month, set aside funds for expenses that don’t occur monthly. Examples of such expenses are oil changes and car insurance that may only occur once every three months. Set aside this money before spending money on entertainment. Every month, some money needs to be set aside for unexpected emergency expenses. Over a three to five year DMP, you’re going to have some kind of unexpected emergency. You need to have this money available when this emergency occurs.

It's important to reward yourself when you reach certain milestones in your Massachusetts DMP. These rewards can increase your chances of successful completion of your debt management program. Imagine working out with no rests between sets. You wouldn't have near as productive of a workout, would you? The same holds for a DMP. Make sure that the reward is inexpensive and doesn't harm your budget. An example of a reward would be a family night at the movies.