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

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In a Nutshell

This section will look at the steps for a successful Massachusetts DMP. The rest of this guide will look at alternatives to a Massachusetts debt management plan.

Written by Lawyer John Coble
Updated January 3, 2020

Former Red Sox pitcher Curt Schilling filed for bankruptcy in 2012. After leaving baseball he founded a video game company that went out of business. The debts that he had guaranteed for this business were too much for him. Like many other people in Massachusetts, Mr. Schilling suffered from a difficult financial situation when he tried to change jobs. If such a disaster can happen to Curt Schilling, it can happen to anyone.

A Massachusetts debt management plan (DMP) is a debt consolidation that uses a credit counseling agency instead of a loan to combine all your debts into one monthly payment. In a Massachusetts DMP, the credit counseling firm negotiates with your creditors to get lower interest rates on your debts. The counseling agency negotiates other more favorable terms with your creditors that allows you to have a repayment plan that will pay off your debts in full within three to five years.

If your credit score isn't high enough to get a debt consolidation loan with a lower interest rate than your current debts’ rates, a Massachusetts debt management plan could be your best option. The most common debts included in DMPs are unsecured debts like credit card debt and medical bills. Massachusetts DMPs aren’t good for payday loans, student loans, or secured loans such as car loans. Other solutions are better for these types of loans.

Massachusetts DMPs are different from debt settlements. In a debt settlement, large lump sum payments settle the debt for less than the full amount owed. In a DMP, a repayment plan is set up that allows you to pay a lower interest rate. You pay your full debt balances in a DMP.

Is a DMP the Same as a Debt Consolidation?

A debt consolidation uses personal loans, credit card balance transfers, or home equity lines of credit to pay off unsecured debts such as credit card debts and medical debts. Since you now have one loan instead of several smaller loans, you only have to keep up with one monthly payment. There are a few risks associated with debt consolidations. Since your old credit cards aren't closed, like with a Massachusetts DMP, you could still use these cards. Using these cards means you have new debt. Adding new debt is exactly the opposite of what you are trying to do: reduce your debt. The debt consolidation loan’s payments are larger than the old debt payments such as credit card payments since the consolidation loan combines these old debts. Getting behind on the large payments for these debt consolidation loans can put you into a tough position of trying to catch up on the consolidation loan. If you have taken out new credit by using your old credit cards, the challenge could be too difficult for you.

How to Become Debt Free With a DMP in Massachusetts

This section will look at the steps for a successful Massachusetts DMP. The rest of this guide will look at alternatives to a Massachusetts debt management plan.

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.

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Massachusetts Debt Consolidation

A Massachusetts debt consolidation loan pays off your old debts allowing you to combine your total debts into one lower monthly payment. The debt consolidation loan has to be at a better interest rate than the loans it replaces otherwise the consolidation wouldn’t be worth doing. For this reason, debt consolidations are best for people with a credit score that's good enough to qualify for a large loan on favorable terms.

Massachusetts Debt Settlement

A Massachusetts debt settlement is when you pay off each debt in a lump sum payment for less than the full amount due. Since you aren't paying the full amount, this will hurt your credit. Debt settlements are not the best option for most people. Debt settlements are best for those who have enough money to make these large lump sum payments and at the same time, have bad credit. This is a small part of the people facing financial challenges.

Massachusetts Bankruptcy

A Massachusetts bankruptcy is a solution that uses the courts as opposed to new loans and counselors. In bankruptcy, a judge eliminates your financial obligations on qualifying loans. If other financial solutions don't work for you, then you owe it to yourself to look into bankruptcy. In cases that don't need an attorney, we offer a way for you to file your own Chapter 7 bankruptcy. In cases that do need the help of an attorney, we can help you find a qualified attorney in your area. When it comes to paying your creditors or providing for your family, you definitely need to consider bankruptcy. We are here to help you with this difficult decision.

Written By:

Lawyer John Coble


John Coble has practiced as both a CPA and an attorney. John's legal specialties were tax law and bankruptcy law. Before starting his own firm, John worked for law offices, accounting firms, and one of America's largest banks. John handled almost 1,500 bankruptcy cases in the eig... read more about Lawyer John Coble

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