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

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In a Nutshell

Continue reading to learn more about a Maine debt management plan as you take steps towards being debt-free.

Written by Attorney Alexander Hernandez
Updated July 10, 2023

Because medical bills are one of the main reasons for filing for bankruptcy, sometimes hospitals need bankruptcy protection as well. This year the Maine Regional Hospital located in Calais filed for bankruptcy as did Penobscot Valley Hospital in Lincoln. Even a senior living facility located in Portland filed for bankruptcy. But before you consider bankruptcy, know there are other debt relief options available to you. Continue reading to learn more.

A Maine debt management plan or a Maine DMP, is a form of debt consolidation. Working with a credit counseling agency, a debt management plan is created based on your budget. The counseling organization will negotiate with the credit card companies on your behalf for a lower interest rate and lower monthly payment. Once there is an agreement, you send a single payment to the counseling agency that disburses that money to each creditor. Since a debt management program isn’t dependent upon your FICO score, it doesn’t matter if you have bad credit.

A debt management plan requires careful planning and adjusting to a budget. For one, instead of making several small payments each month to creditors, you make a larger single payment. Depending on your payment due date, this could make budgeting difficult. Also, if you don’t complete the debt management program, the interest you weren’t paying during the plan will start up again, costing you more money. Your credit card accounts will also be closed, and this will have a negative impact on your credit score, but only temporarily. 

A Maine DMP works best for certain types of unsecured debt such as personal loans and credit card debt. Other unsecured debt such as medical bills, student loans, and payday loans shouldn’t be included in a debt management plan nor secured debt like auto loans or mortgages.

While a debt management plan is a form of debt consolidation, it’s different from a debt settlement and a debt consolidation loan. Continue reading to learn more about debt consolidation and the differences between each.

Is a DMP the Same as a Debt Consolidation?

With a Maine DMP, you agree to pay back your total debt. With a debt settlement, you are paying back a portion of your debt. With a debt consolidation loan, you are also paying back 100% of your debt. However, you are doing so by getting a new loan or credit card which requires good credit. With a DMP, you aren’t getting a new loan, just negotiating a repayment plan. 

Reasons to consider a debt consolidation loan:

  • Your accounts will remain open while with a DMP accounts are closed by the creditor;

  • You can get into new debt if need be, while with a DMP you can’t except under very limited circumstances;

  • Your credit score could increase with a loan consolidation;

  • You will have a lower interest rate and lower monthly payment. 

There are several debt relief options when it comes to a consolidation loan. The most common is a credit card balance transfer where your credit card debt is transferred to a new credit card. A lower interest rate is usually offered during the introductory period. However, when the promotional period expires, confirm the new interest rate. If it’s higher than before, it’s costing you more money. If overspending is the reason why you consolidated your debt, you may end up in more debt since you have credit available on your credit cards. 

If you own a home, you may be able to consolidate your debt with a mortgage refinance or home equity line of credit. While you will have a lower monthly payment, in the long run, you will be paying more. An unsecured debt consolidation loan does offer the least risk because if you fall behind on your mortgage or line of credit, you risk foreclosure.

How to Become Debt Free with a DMP in Maine

Continue reading to learn more about a Maine debt management plan as you take steps towards being debt-free.

Find a Credit Counseling Agency

Always work with a trustworthy credit counseling agency. If you can’t get a referral from friends or family, use resources you can trust to research the different agencies. With the Council on Accreditation (COA), you can find out if an agency is accredited. The National Foundation for Credit Counseling (NFCC) is the largest nonprofit counseling organization in the United States and is also an excellent source of information. To be a certified member of the NFCC as a nonprofit credit counseling agency, the agency has to meet the strict standards of the Council on Accreditation. For-profit companies aren’t required to comply with the standards of the COA. Other excellent sources for information is the Maine State Attorney General’s Office which includes links to the Consumer Protection Agency, fraud alerts, and scams. The BBB (Better Business Bureau) also has information available on local businesses. 

After researching the credit counseling agency and choosing one to work with, be prepared to ask questions to make sure you are a good fit. Remember, you want to choose an agency you can trust and feel comfortable working with. The initial credit counseling session with a credit counseling agency is free, but if you hire the agency, there will be additional fees. Ask what those fees are and get it in writing. Ask the credit counselor if a bonus or commission is paid for new accounts. If so, there may be an incentive to put you in a program that isn’t beneficial to you. Also, ask about free services that you may qualify for. If the credit counseling agency doesn’t have free informational material available or doesn’t want to provide the information, move on to another agency. This is your time and money and you are entitled to the best possible service as a consumer. Continue reading to learn what to expect when working with a credit counseling agency.

What to Expect at Credit Counseling

Credit counseling sessions differ from one agency to the next. Most sessions are by phone, some online. If you don’t feel comfortable with the technology, search for an agency that does in-person consultations. Schedule time for your first session as it can last between 45 to 60 minutes. Have your average paystub ready. If you include paystubs that have more overtime than normal, it will look like you make much more per month than you really do. Also, have your recent credit card statements since they will include the balance, interest rate, and the minimum monthly payment due on your credit card. It’s also helpful to have your credit report to make sure all your debts are included. Since you are entitled to a free credit report every year, check your credit history for any mistakes. Disputes can be filed under the Fair Credit Reporting Act at no cost to you.

Since your conversation with the credit counselor is confidential, be honest. Creditors won’t be present nor even know about your conversation until it’s time to negotiate your debts. In your session with the credit counselor, expect to:

  • review your income, expenses, and debt;

  • discuss financial goals (short term and long term);

  • discuss options available to you including a debt management plan, debt consolidation loan, and bankruptcy.

Making the Decision & Getting Started

After you’ve completed your counseling session, you should find out about any set-up fees and monthly fees charged by the agency. Review your options and take your time to decide. If you are being pressured by the counselor for a decision, consider consulting with another agency.

As you weigh your choices, be honest with yourself. Ask yourself if you can stick to the budget. You don’t want to end up worse off by defaulting on your payments. Remember, there are other options available to you, including bankruptcy. If you want to speak with an attorney, Upsolve can refer you to a bankruptcy attorney for a free consultation.

Put Together Your Maine Debt Management Plan

Gather all the information requested by the credit counselor. To begin working on your file, the credit counselor will need certain documents such as bank statements, credit card bills, and paystubs. Find out how many months of documents are needed and provide the documents within the time frame requested to avoid unnecessary delays. If you need to provide your cardholder agreement and you don’t have it, ask the creditor to mail it to you or visit their website for more information. The cardholder agreement was initially mailed to you when you opened your account. You can also search the government’s Consumer Financial Protection Bureau’s website for a copy.

Review your bank statements to make sure all your expenses were included. Look for bills that occur every few months like car maintenance or even annually such as property taxes and home insurance. If you don’t include these expenses, you won’t have the money to pay them when they come due. Confirm a convenient due date to avoid large expenses during the same pay period. Consider bi-weekly payments for your Maine DMP if it is more convenient.  Get copies of all documents signed by you and prepared by the counseling agency. Ask questions if you don’t understand the details of the agreement. 

Continue reading to learn the next steps of your debt management plan.

Begin Payments

The first few weeks of your DMP are important as you adjust to your new budget.  The counseling agency will now forward the DMP to the different creditors. Since the agency has likely worked with the different creditors involved, ask how long it usually takes to reach an agreement. Find out how you can communicate with the counseling agency on the status of your case. As negotiations begin, your credit score will drop temporarily. However, once the plan gets approved by creditors and you continue to make timely payments, your debt will decrease, and your credit score will increase. 

How to Stay Current With Your Maine Debt Management Plan

To succeed with your debt management plan, avoid certain financial pitfalls. As stated previously, make sure the due date is convenient. If there are any changes in your financial situation like an emergency, notify the credit counselor immediately. Remember, your credit counselor is trained to handle financial situations such as yours. If you need to use a credit card to pay for the emergency, confirm with the counselor this isn’t a violation of the agreement.

Start tracking your spending habits and find areas of overspending by using helpful apps such as Mint and Albert. If you can reduce your expenses, use the extra money to pay more than the minimum payment on your Maine DMP. Also, open a savings account to prepare for any future emergency. Talk with your counselor about setting goals. As you take steps towards being debt-free, be proud of your accomplishments in reaching your goals. Reward yourself. 

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Maine Debt Consolidation

A debt management plan is a form of debt consolidation, but with good credit, a debt consolidation loan is another option. Remember, with a debt management plan you aren’t getting new debt, just renegotiating your current debt. With a Maine debt consolidation loan, you are getting a new loan or debt to pay off your creditors. Types of debt consolidation loans include a credit card balance transfer, personal loans, a mortgage refinance, or a home equity loan. To find out how a debt settlement is different from a debt consolidation loan and debt management plan, continue reading.

Maine Debt Settlement

A debt settlement is different than a debt management plan. With a Maine debt settlement, an agreement is reached to pay back a portion of the original debt. This results in tax consequences on the amount of debt forgiven. For example, if you owe $1,000 but settle on $600, you could be taxed on the $400 difference. Debt settlements are common when a lawsuit has been filed against you or it’s old debt that is now owned by a collection agency. Since you likely have bad credit at this point, it may be to your advantage to settle the debt. Debt settlements usually involve lump-sum payments instead of extended monthly payments like a debt management plan. Before you hire a debt settlement company to negotiate for you, use the links previously provided to do your research on the company. Make sure all agreements are in writing to avoid any misunderstandings.

Maine Bankruptcy

If you didn’t qualify for a loan consolidation or couldn’t afford a debt management plan, consider a Maine bankruptcy. At Upsolve, we are here to help at no cost to you. We have successfully helped thousands of people like you who need debt solutions. We can even refer you to a local bankruptcy attorney if you want more information on your options, even if you don’t qualify for our free service.

Written By:

Attorney Alexander Hernandez


Since graduating from Nova Southeastern School of Law in 1999, Alexander Hernandez has focused a majority of his law practice on bankruptcy law. He was a founding partner of the South Florida Bankruptcy Center which focused exclusively on Chapter 7 and Chapter 13 bankruptcies. Al... read more about Attorney Alexander Hernandez

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