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

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.