How to Become Debt Free with A Debt Management Plan in Ohio

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Written by Upsolve Team.  
Updated February 20, 2020

Summary

An Ohio debt management plan can help you become debt free by helping you set financial goals and by making it easier to make monthly payments. If you’d like to learn more about how a DMP in Ohio works, keep reading to discover the steps and the commitments you’ll need to make to make a DMP effective. 

If you’re having trouble managing your debt, you’re not alone. Debt has a domino effect and it hits communities hard. If you have a steady income but your debt payments aren’t so steady, an Ohio debt management plan might be an excellent resource for you. A debt management plan, also referred to as DMP, is a debt relief solution for unsecured debt, like credit card debt and personal loans. A DMP may also cover certain medical bills. You can manage your budget easier with consolidated monthly payments using an Ohio debt management plan because you only have to focus on making one payment instead of several. 

An Ohio debt management plan is a debt relief program that allows you to pay the remaining balance of certain unsecured debts per the terms of a monthly repayment plan. Under the DMP, you’ll only have to pay the monthly lump sum until your consolidated debt is paid in full. You won’t have to make individual payments to each creditor included in the plan—the plan administrator (employed by a nonprofit credit counseling agency) will make the payments to creditors for you. 

A professional working on your debt management plan will talk to creditors about lower interest rates and lower monthly payments. During the DMP process, you’ll have to review your personal financial situation and collect documents to determine if you can realistically pay off the unsecured debt within a few years. A credit counselor will help you. It’s common for a debt management plan to last 2-5 years until the included debt is paid off in full. Creditors may choose to close your credit lines while you are on an Ohio DMP. You can ask a credit counselor if a DMP can help you with student loans or payday loans based on your situation. Student loans are usually not included in a debt management plan because of unique student loan terms.

Is a DMP the Same as a Debt Consolidation?

Two classic forms of debt consolidation are debt management plans (DMPs) and debt consolidation loans. In a DMP, you consolidate monthly payments so that you can make one monthly payment to pay off multiple creditors. With a debt consolidation loan, you take out a new loan to pay off multiple creditors. You basically transfer your debt when you use a debt consolidation loan. In either case, you streamline your debt so that you make one monthly payment instead of multiple payments to multiple creditors. 

One example of a debt consolidation loan involves when a person takes out a personal loan to pay off credit cards. If you have a good credit score you may be able to take out a debt consolidation loan. You could take out a debt consolidation loan that has a lower interest rate than your credit card debt and that would lower your monthly payments. In a debt management plan, you may also get lower interest rate payments.  Home equity loans and mortgage refinancing are also examples of debt consolidation loans, but you risk losing your home if you can’t make the monthly payments. People with good credit tend to favor debt consolidation loans, while people with rough credit tend to favor DMPs. 

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How to Become Debt Free with A Debt Management Plan in Ohio

An Ohio debt management plan can help you become debt free by helping you set financial goals and by making it easier to make monthly payments. If you’d like to learn more about how a DMP in Ohio works, keep reading to discover the steps and the commitments you’ll need to make to make a DMP effective.


Find a Credit Counseling Agency

To find a credit counseling agency, start with the NFCC. The National Foundation for Credit Counseling (NFCC) is a reliable source for information on nonprofit credit counseling agencies and credit counselor accreditation.  The NFCC works with the Council on Accreditation (COA) to maintain high standards in ethics and education for credit counselors. You’ll get a free credit counseling consultation when you first make an appointment with a credit counseling agency

To be accredited, a nonprofit credit counseling agency must verify it’s following regulations and maintaining client privacy.  Accredited counselors are educated in financial management. The COA investigates and proves that accredited counselors and counseling agencies are reputable, which is important as many for-profit agencies operate as scams. Partially for this reason, you’ll want to check the reputation of any agency you’re interested in working with. You can check for complaints on the website for the Better Business Bureau (BBB) and you can check for scams on the website for the Federal Trade Commission (FTC). The Ohio Attorney General website has consumer FAQs that might help your research, and Ohio also has county Consumer Protection offices in Cuyahoga and Summit counties. 

Credit counseling agencies might be local organizations, internet-based, or only available by phone. At a minimum, you should be able to receive a free initial consultation and more information on debt relief, agency fees, and how credit counseling agencies work. Ask a lot of questions. If you don’t get answers, go elsewhere.

What to Expect at Credit Counseling

Your first meeting with a certified credit counselor to discuss your financial priorities, known as “credit counseling,” is confidential. The counseling session shouldn’t last more than an hour. You and the counselor will simply review your financial documents and create an action plan for your eventual debt relief. 

You’ll want to bring along documentation related to your debt and income. Even if you don’t want all your debt consolidated in your debt management program, your counselor will need to get the big picture on your finances to help you manage your Ohio DMP, and to help decide if a DMP is your best debt relief option. Creditors will be called at another time to negotiate for lower interest rates and monthly payments.

Making the Decision & Getting Started

The decision to get started with an Ohio debt management plan should not be rushed. There are several debt relief options available. If you have a house loan or auto loan and are worried about foreclosure or having your vehicle repossessed, ask your credit counselor about bankruptcy and consider talking to a bankruptcy attorney. Defaulting on your DMP could leave you with extra penalties and fees, so go over the numbers several times before you make a final decision.

Take time to revisit the fees the credit counseling agency is charging. Make sure you have your answers to the following questions:

  • Is there a set-up fee for the debt management plan?

  • What are the late fees?

  • Are there monthly fees the credit counseling agency charges?

  • Does the counselor work on commission?

  • Did the counselor discuss Ohio laws that limit fees?

Take a close look at your personal spending habits. Can you comfortably make the DMP payments? If your family is involved, discuss how budget changes will affect the household. Double-check your emergency spending fund.  Once you’re confident you can make the payments, you can take the steps to get your Ohio DMP together. 

Put Together Your Ohio Debt Management Plan

During the final steps of putting together your Ohio debt management plan, you’ll likely have to provide the credit counseling agency with more documentation about your debt, and also provide copies of your bank account statements and credit card agreements. You and a DMP professional will discuss due dates, monthly payments, and refine your payment timelines. You’ll also decide the best time for you to make the first payment on your Ohio debt management plan and sign DMP agreements.

Your bank account statements have proof of your assets and reflect your savings and spending. Bank statements also help determine the best due dates for your DMP monthly payments. Many people don’t keep copies of their credit card agreements, but you should be able to find copies on the websites for the credit card companies. If you can’t find the agreements online go to the Consumer Financial Protection Bureau (CFPB) website and take a look at their database of credit card agreements. Simply search for each issuer’s name. If you don’t know the name, look at the back of your credit card. 

Begin Payments

The payments for your Ohio debt management plan generally won’t start until you’ve signed your payment schedule agreement and the plan is verified with creditors. Before that happens, the counseling agency should tell you what the proposed date is for the first payment will be. If you don’t know the date of your first DMP payment, ask the agency when your first payment is due. You can also ask the agency to keep you informed about the status of each creditor’s acceptance of the debt management plan. Note that your credit score will go up and down while you’re on the debt management plan. Creditors will start closing your accounts and that could have a negative impact. As your balance goes down, your credit score will ultimately go up.

How to Stay Current with Your Ohio Debt Management Plan

It’s important to stay current with your Ohio debt management plan so you don’t end up falling into a painful pile of more debt. To keep your budget healthy, look at your yearly spending habits and take time to put some preventative measures into place before you make your first payment. When your payment schedule is in place, create a calendar system to remind yourself of payments. There are plenty of apps and calendars available that can help. Create some quarterly milestones and reward yourself (without going into more debt!) when you make all your payments on time, and have a celebration after each year. Indulging yourself in a small (debt-free) personal pleasure after each payment can help you develop a healthy habit to make your Ohio DMP payment on time.

Before you have a payment schedule, be sure to identify the months and weeks you typically have the most expenses due. Be sure to look out for due dates of odd expenses like car insurance and registration, holidays, family obligations, and court-ordered expenses. Be proactive and plan for emergencies in your budget. Talk to your counselor about funding for emergencies before you sign your payment schedule. When the unexpected happens and you can’t make a payment, let the DMP administrator know your financial situation right away so they can help you with damage control. 

Ohio Debt Consolidation

If you want to streamline your debt but you would prefer not to work with a credit counseling agency to set up a DMP, you can take out an Ohio debt consolidation loan if your credit is still healthy. When a debt consolidation loan is used for debt relief, the goal is to find a loan with lower interest rates than the debt you’re currently paying. You will use the loan to pay debt balances on bills. You will then have one payment to manage each month—your new debt consolidation loan payment. 

Ohio Debt Settlement

If you don’t have an overwhelming number of creditors and can make a few big lump sum payments, an Ohio debt settlement option might be a solution. In a debt settlement program, you’ll pay part of your total debt and the remaining debt will be forgiven.  Negotiations with creditors will determine the settlement amount. Keep in mind that you’ll have to pay taxes on the forgiven amount if it’s over $600, and it’ll have a temporary negative impact on your credit report. 

Ohio Bankruptcy

If your debts are overwhelming and your income isn’t enough to get by, think about filing for Ohio bankruptcy. You can discuss the benefits and risks of a Chapter 7 Ohio bankruptcy and the advantages of making payments through a Chapter 13 bankruptcy with a bankruptcy attorney.  Bankruptcy can help protect your assets, discharge your unsecured debt, stop collection calls from collection agencies, and stop wage garnishments. You can set up a free consultation with an attorney specializing in bankruptcy, or save attorney fees and file your Chapter 7 bankruptcy without an attorney

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