How to Become Debt Free With a Debt Management Plan in Oregon
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An Oregon DMP will allow you to combine your debt into one simple, manageable account, paid monthly to a counseling agency until you are debt-free. The process below explains the key steps of evaluating your finances, creating a realistic repayment plan, and putting that plan in action to set your finances straight.
Written by Upsolve Team.
Updated April 27, 2020
Getting out of debt is never easy. However, working with a credit counseling agency and taking advantage of a debt management program is often an excellent way to begin working towards becoming debt-free. After you sign up, you create a realistic plan with your credit counselor to completely repay your consolidated unsecured debt accounts. Essentially, the agency contacts each of your creditors to negotiate acceptance of the plan’s terms. They often negotiate lower interest rates, which can help with high-interest debt like credit cards. They may also be able to reduce the amount that you owe each of your creditors on a monthly basis. One the terms are set, the agency will administer your Oregon debt management plan and, acting as middle-man, pass on the funds from your single monthly payment to your numerous creditors until your combined accounts are paid in full. This streamlined process often helps individuals avoid late fees and penalties on multiple accounts and makes repaying numerous debts more manageable and affordable.
With that said, an Oregon debt management plan isn’t the right option for everyone. The program only handles certain unsecured debts like credit card debt and in some cases medical bills, so if you have payday loans or secured debt like a car loan you should explore different options. Additionally, if you don’t have access to regular income that allows you to make your monthly payments on time, this arrangement won’t work for your situation. Finally, credit card companies will likely close your accounts when you begin making payments, and you’ll be generally prohibited from taking out new debt until your DMP is paid off.
There’s a lot to think about, but don’t worry! You don’t have to choose a debt management option immediately, and no-cost resources are available to help you make the informed choice that makes the most sense for your unique circumstances.
Is a Debt Management Plan the Same as a Debt Consolidation?
An Oregon debt management plan is one type of debt relief that is categorized as “debt consolidation.” Debt consolidation consists of two options: entering into a DMP and taking out a debt consolidation loan. Debt consolidation loans and DMPs are both used to lower payments and give you lower interest rates. And, both debt relief options roll multiple accounts into a single account which is paid off monthly. However, one involves taking out a new line of credit and the other does not.
A debt management plan does not involve securing a new loan. That means you don’t need a certain credit score to qualify for a DMP. You also don’t have to risk your home or other property by defaulting on a secured loan. A consolidation loan, unlike an Oregon DMP, doesn’t appear on your credit report, and you can still keep your credit card accounts open and open new lines of credit if you’re qualified. By contrast, credit card companies will generally close your accounts as soon as they’re aware you have entered into a DMP.
How to Become Debt Free with a Debt Management Plan in Oregon
An Oregon DMP will allow you to combine your debt into one simple, manageable account, paid monthly to a counseling agency until you are debt-free. The process below explains the key steps of evaluating your finances, creating a realistic repayment plan, and putting that plan in action to set your finances straight.
Find a Credit Counseling Agency
Before you create an Oregon debt management plan, you’ll need to find a trustworthy credit counseling agency to administer your DMP. These agencies and their counselors must be licensed if they are operating in Oregon. Nonprofit agencies don’t charge a fee for an initial credit counseling session. As a result, you shouldn’t hesitate to sign up for this service, even if you’re not sure whether a DMP is the best option for you. Nonprofit agencies in Oregon offer free credit counseling advice that you can use even if you decide not to use their professional services, so seeking out a nonprofit agency is a great first step towards more fully evaluating your debt management and debt relief options.
You should be provided with free informational materials on request from any agency that you’re interested in working with. You can also ask questions about what you can expect at your credit counseling session, fees for additional services you may be offered (and what happens if you can’t afford fees down the road), and how their counselors are compensated.
When finding a credit counseling agency, you should do some research to make sure that those you’re interested in are reputable operations. Check with the Better Business Bureau to see if any given company is in good standing. The Oregon Attorney General’s website will also have a history of any complaints filed against the agency by Oregon residents. Also, make sure the agency you choose is accredited by COA and listed on the NFCC (National Foundation for Credit Counseling) website. NFCC is the country’s largest nonprofit financial counseling organization and only accepts certified members.
What to Expect at Credit Counseling
Don’t stress about your initial counseling session. It’s essentially just a conversation about your finances with a credit counselor that should take less than an hour. Oregon credit counselors can advise you on a variety of topics including personal finance, debt management, and debt relief options. At the conclusion of this free session, you’ll be given personalized guidance regarding the next steps you should take to reach your financial goals.
You should gather some documents to bring with you (or, if you’re talking on the phone, have them handy) regarding your income, expenses such as utility and mortgage bills, and debts. These documents will help your credit counselor provide you with informed advice. If possible, you’ll want to have a list of secured and unsecured debts you owe each creditor, interest rates, and minimum payments due each month. You can find a lot of this information by requesting a free copy of your credit report. You should also create a comprehensive budget to present to your counselor so that they better understand the kinds of obligations and limitations you’re working with. At the end of the session, your counselor will make recommendations that may work best for you, but the final decision regarding whether or not to act on these recommendations is yours.
Making the Decision & Getting Started
Ask questions before you make a final decision to commit to an Oregon DMP. Does the agency charge set-up fees, monthly fee for administering your debt management plan, or any other fees? If so, how much? These fees are legal in Oregon. Any debt management company can only legally charge a monthly fee of 15% of the amount paid to the debt management service provider (with a cap of $65).
Find out whether your CCA has a good relationship with any or all of your creditors. Long-standing professional relationships can make it easier for your agency to secure a creditor’s agreement. Remember you don’t have to make a decision immediately; it’s not a good sign if your credit counselor pressures you to decide at the end of your session or keeps pushing you to make a specific choice. You should also consider whether your budget is realistic and you can afford DMP payments every month. If you default on your Oregon DMP, the penalties and default interest rates that follow could leave you much worse off financially than before you started the DMP.
Remember to consider all of your options. Different solutions work better for different people. Bankruptcy may even be the best choice for you, as it may allow you to erase many or all of your debts and start fresh. If you have questions about bankruptcy, Upsolve can help you find an Oregon bankruptcy lawyer to answer your questions and give you personalized advice based on your unique situation.
Put Together Your Oregon Debt Management Plan
As you put together your Oregon debt management plan, your credit counselor will ask for a lot of very detailed financial information from you to make the plan as effective as possible. The information is much more specific than anything you used for your initial counseling session. They’ll need bank account information, detailed credit card information, and recent personal loan statements. If you don’t have cardholder agreements from your credit cards, contact the companies to get copies so your counselor has your specific account terms when they contact your creditors.
Make sure the due date and monthly payment still work for you. Recheck your budget again to see if you overlooked any expenses. Can you stick to that budget for several years? Speak up if any details bother you. Ask any last-minute questions about the timeline or your monthly fees. Once your plan is sent to your creditors, if they accept them, you’re committed to following through.
Begin Payments
You’ve gathered documents, you’ve had financial counseling, you’ve crunched numbers, and now your Oregon debt management plan is in place. From here, your job is to make your monthly debt payments until you are free and clear. By now, your counselor should’ve given you the payment due date and monthly payment amount for your plan. Mark them on your calendar or set a reminder on your phone so you don’t forget. Make your payments on time every month. Pay early if possible and consider extra payments if you come into additional income. Your counseling agency will reach out to creditors to secure acceptance of your Oregon DMP. If you don’t get a response right away, don’t worry. It takes time for counselors and creditors to connect and establish an official agreement. You can always contact your counselor for an update.
How to Stay Current With your Oregon Debt Management Plan
Your debt management program is coming along – you’ve finalized your plan and your creditors accepted it. It’s critical from here on out that you make your payments on time every month. You and your credit counselor examined your finances and created a realistic plan for what you could spend on your income while still affording your payments. Honor that work and protect your financial future by making your payments on time, every month. Stay on budget however you can, track your spending to avoid needless expenses, and set aside money for emergencies and large, expected expenses. Don’t use credit cards, even for emergencies, until you talk to your counselor and make sure that use of credit doesn’t violate the terms of your Oregon DMP. Find a way to celebrate significant milestones along the way. You’ve worked hard, so be sure to take time and pat yourself on the back for the progress you’ve made.
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Oregon Debt Consolidation
Debt consolidation loans allow borrowers to secure a new line of credit so that they can use that new credit to pay off higher interest debts. By combining their accounts into a single account, they streamline the debt repayment process. Loans can be secured (like home equity lines of credit) or unsecured (like credit card balance transfers.) Even though this option may sound appealing, borrowers with good or excellent credit scores are usually the only ones who qualify for an Oregon debt consolidation loan, so please keep this in mind when evaluating this option.
Oregon Debt Settlement
The Oregon debt settlement process allows you to make a lump sum payment to a creditor in exchange for partial debt forgiveness and the closure of your account. The idea of paying less than you owe is attractive to many. However, it is important to keep in mind that this option will negatively impact your credit and no creditor is obligated to accept your offer. In the meantime, your creditor will likely report your account delinquency to the credit bureaus, can give your debt to a collection agency, or even file a lawsuit against you. Generally, Oregon debt settlement works best if you currently have the funds to make lump-sum offers. You’ll have to decide whether the risk and potential reward are right for you.
Oregon Bankruptcy
In some situations, filing an Oregon bankruptcy may be the best choice for you. Bankruptcy can allow you to have your eligible debts eliminated in just a few months’ time. Although bankruptcy will temporarily affect your credit, it can allow you to make a fresh start and ultimately make it easier to rebuild your credit over time. An Oregon bankruptcy lawyer can advise if bankruptcy is best for you, and if you decide to pursue bankruptcy Upsolve may be able to help you handle it without the expense of a lawyer.
