How to Become Debt Free With a Debt Management Plan in New Jersey

Find a Credit Counseling Agency

It’s important to begin the process of determining whether a DMP may be a good option for you by finding a good credit counseling agency. You’ll want to work with an accredited nonprofit credit counseling agency. Accredited organizations must meet certain standards to ensure they follow proper business practices. You can check any agency’s accreditation status by visiting the websites of the NFCC or COA. The National Foundation for Credit Counseling (NFCC) is the largest and longest-serving nonprofit financial counseling organization in the United States. NFCC member agencies are accredited. The Council on Accreditation oversees and administers the accreditation process. In addition to confirming an agency’s accreditation, check the agency’s reputation with the New Jersey Attorney General's office or the Better Business Bureau. You don’t want to work with a scam artist; choosing an accredited agency will help you avoid being taken advantage of. 

You should also look into what the agency charges for any of its follow-up services. Your initial credit counseling session is always free, but the agency will likely charge you fees for administering a DMP and/or allowing you access to additional money management resources. Ask what the agency can do if you can’t afford their fees. Find out how your credit counselor is compensated. You might get pushed into a solution that isn’t right for you if your credit counselor gets a bonus if you sign up. Finally, find out how the credit counseling agency will communicate with you during the administration of your plan. If you prefer phone conversations over emails, find out if they are available over the phone when you need assistance.

What to Expect at Credit Counseling

You’ll want to take some time to prepare for your first credit counseling session. Gather up your credit card bills and debt statements like medical and utility bills. It’s helpful if the statements list the interest rates and minimum monthly payments you’re required to make. You can also pull your credit report for free to make sure that you let your counselor know about all the debts you owe. You’ll also want to get a good idea of your monthly income. Gather your recent paycheck stubs, benefit statements, and other relevant proof of income. Finally, write down your recurring monthly expenses, like car loans and utility expenses and any predictable but irregular expenses you incur each year, like car repairs and holiday gifts. Your counselor will want to know what kind of payments you can afford each month. 

The initial counseling session takes about an hour. Everything you discuss will be confidential. Your creditors won’t be notified of your session or anything you discuss during your session. The credit counselor will ask about your income, expenses, and debts. You and the credit counselor will establish financial goals and develop an action plan to achieve those goals. At the end of the session, the credit counseling agency will give you their recommendations. Your counselor may recommend a debt management program if you’re a good candidate for this process.

Making the Decision & Getting Started

You shouldn’t commit to entering into a debt management plan right away. You should spend some time reviewing your options and deciding what debt relief option will work best for you and your family. Your credit counselor shouldn’t pressure you into making a choice. Talk with your family and see if they are on board with your decision to enter into a DMP. Determine whether you can stick to a budget, as a successful debt consolidation process is dependent upon timely monthly payments. When exploring your options, you may even benefit from speaking with a bankruptcy attorney. Bankruptcy may be a better debt management alternative for your situation. However, if you can commit to the monthly payment and it seems like the best option available, then maybe you’re ready to move forward with a debt management plan.

Put Together Your New Jersey Debt Management Plan

You’ll need to provide your credit counselor with additional information before you can enter into a New Jersey DMP designed to succeed. Your counselor will ask for bank account information. They may ask for more detailed credit card account information and cardholder agreements. A cardholder agreement contains the terms and conditions of a credit card account. These agreements outline important information they will need to formulate your plan. You likely received one in the mail when you opened your card. The CFPB has sample agreements online. 

It’s important to create terms of your New Jersey DMP that will work for you. Choose a due date that makes sense for your financial situation. Depending on your pay frequency, you may ask to make your DMP payments bi-weekly rather than monthly. Figure out when your creditors will start receiving funds. Ask your credit counselor if you should be making payments to your creditors on your own until this time.  

Begin Payments

Your credit counseling agency will contact your creditors to establish a plan and an agreement with each of them. They already have relationships with many creditors. Ask your agency about how long this process will take. After they reach an agreement with your creditors, talk with your credit counselor to make sure you’ve gotten the due date and payment amounts correct. Make your debt management program payments early if you can. Use the first few weeks of your debt management plan to manage your budget and make sure your expenses are being paid.

How to Stay Current with Your New Jersey Debt Management Plan

Careful planning before you start making payments will help you avoid problems for the duration of your New Jersey DMP. First, set your DMP monthly payment due date when no other large expenses are also coming due. If you track your spending, you can determine when you’ll have the money for the payment. You can use a budgeting app or a simple spreadsheet. If your income or expenses change dramatically, inform your credit counselor and request to change your regular payment due date if necessary. 

Make extra payments on your plan when you are able. On the other hand, if you do have an emergency, talk to your credit counselor. They may have options or recommendations for you. Emergency expenses like car repairs or medical copays can break a budget. As a result, you’ll want to budget some extra savings each month in case of an unexpected one-time expense. If you use emergency funds, remember to replenish them again. If you have a grasp on your budget and spending at the start of your plan, you’ll be in a better position to make your regular monthly payments without much hassle.