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

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In a Nutshell

This section will focus on the different steps to a successful Utah debt management plan. The rest of this guide will discuss alternative debt solutions.

Written by Attorney John Coble.  
Updated January 3, 2020


We live in a time when some say the economy is the "best it has ever been." Yet the most recent Federal Reserve Report on the Economic Well-Being of U.S. Households shows that 40% of Americans don't have enough money to cover a $400 emergency, 20% of Americans aren't able to pay their monthly bills, and 25% of Americans skip necessary medical care because they can’t afford it. This information is on Page 3 of the Federal Reserve’s report. The real economy hasn't always been so bad. Utahns are among the most productive people in America, but they do face unique financial challenges such as the high cost of housing. Utahns from all walks of life are facing financial distress. We are here to help you find solutions to your financial problems.

A Utah debt management plan (DMP) is a good way to consolidate your debts into one lower monthly payment. A Utah DMP is like a debt consolidation except that a debt consolidation uses a loan to combine your debts into one payment. A DMP uses a credit counseling agency to negotiate more favorable terms with your creditors. The credit counseling organization sets up a repayment plan that combines your total debt payments into one monthly payment that is less than the combined minimum credit card payments on your credit card accounts. You pay the credit counseling company one payment instead of having to make many different payments for your debts. The debt management program pays off all the unsecured debts you include by the end of the DMP. It's not a good idea to put some types of unsecured debts on a DMP. These debts include payday loans and student loans. A Utah DMP is a great solution for someone whose credit report isn’t good enough to get a loan with a favorable interest rate for a consolidation. Unlike paying the minimum payments on your credit card debt and seeing little change in your balances, with a DMP, you pay less than your combined minimum payments and you will see your balances go down until they reach zero by the end of the Utah DMP. 

Is a DMP the Same as a Debt Consolidation?

A debt consolidation uses a loan to pay off your debts. You then only have to make the payment on the debt consolidation loan to eliminate the debt. Debt consolidation loans can be either home equity lines of credit, personal loans, or credit card balance transfers. A consolidation will only help you if the consolidation loan has an interest rate that's less than the rates on the debts that you paid off with the loan. If your credit score, sometimes referred to as FICO score, isn't high enough to get this more favorable rate, you may be better off in a Utah debt management plan. 

There are some risks with these debt consolidation loans. If you use a credit card balance transfer and don't get the new card paid off before the introductory interest rate expires, you could be in a worse financial situation than before your consolidation. If you use a home equity line of credit for the consolidation loan and default, you could lose your home.

How to Become Debt Free With a DMP in Utah

This section will focus on the different steps to a successful Utah debt management plan. The rest of this guide will discuss alternative debt solutions.


Find a Credit Counseling Agency

One of the most important aspects of a Utah debt management plan is finding the right credit counseling agency for you. Make sure you're dealing with a nonprofit credit counseling agency. There are for-profit credit counseling firms that are sometimes called debt relief companies. The debt relief companies are in business to make a profit. This profit incentive may cause such firms to put their own interests ahead of yours. One way to make sure you're doing business with a reputable nonprofit credit counseling company is to see if they're a member of the National Foundation for Credit Counseling (NFCC). The NFCC is the oldest organization of nonprofit counseling agencies in the country. The NFCC has strict requirements for all its members.

It's always a good idea to ask how the credit counseling firm pays its credit counselors. It's a red flag if the agency pays the counselors bonuses or other incentives. Such incentives tempt counselors to put their own interests above your interests. You need to know these things before entering into an agreement with a credit counseling firm. Ask the credit counseling company about the cost of the initial credit counseling session. It should always be free since good counseling agencies don't charge for basic credit counseling. Credit counseling is sometimes referred to as financial counseling.

The first appointment will take forty-five minutes to an hour. This session may be over the phone, in an online meeting, or an in-person meeting. It’s good to have your credit card bills, other bills, paycheck stubs, bank account statements and credit reports on hand when attending this session. You can get your free credit report at annualcreditreport.com. Getting your credit report won't have a negative impact on your credit score.

What to Expect at Credit Counseling

At your first credit counseling session, your trained and certified credit counselor will get a general idea of your monthly expenses, income, and debts. You and your counselor will establish your short-term and long-term financial goals. Then, you and the counselor will create a plan of action for you to achieve these goals. Your creditors aren’t in the loop in these initial stages. Everything in this first session is confidential. Your creditors don't learn anything about your plan until you've signed off on your Utah debt management plan and have started making payments. At this point, in your Utah DMP, your counselor contacts your creditors to negotiate a better deal for you.

Making the Decision & Getting Started

If your credit counselor pushes you to make a decision at the end of your first session, you may be using the wrong credit counseling company. You owe it to yourself to take time to consider the pros and cons of the counselor's recommendations. You owe it to yourself to be comfortable with the process. It's important that you feel comfortable with the budget you'll have to meet to have a successful Utah debt management plan. If you have a family, are they ready to make the sacrifices necessary to stay on this budget? These are important questions since failing in a Utah DMP can leave you with higher interest rates, late fees, and a worse financial situation than before you started your debt management program. Have you considered other debt-relief options? Have you considered bankruptcy? It's always a good idea to do a free initial consultation with a qualified bankruptcy attorney to see what they can do for you.

Put Together Your Utah Debt Management Plan

When putting together your Utah debt management plan, your credit counselor will need more detailed information than in the initial session. They will need more detailed bank account information and detailed information about each credit card. Your counselor will need your credit card agreement for each credit card company. This is necessary for your counselor to negotiate better terms for you. If you don't know where all your credit card agreements are, you aren't alone. Few people keep all these agreements. There is an easy way to get your agreements though. You can use the Consumer Financial Protection Bureau's Credit Card Agreement Database to get a copy of your credit card agreement for your counselor to use.

Your creditors don't have to agree with the terms that your counselor wants. This is rarely a problem because the credit card companies know that you have options such as bankruptcy. The credit card companies would rather you pay in full at a lower interest rate than to get nothing from you in bankruptcy. Your counselor will know how far they can push your creditors to get the best deal for you.

Begin Payments

Make sure that you and your credit counselor are on the same page. Make sure you know the payment amounts you are to make and the correct due date. The most important thing that you will do during your Utah debt management plan is to make your payments on time. It’s also important that you pay any other bills that you have and stay on your budget. Once you've signed off on the Utah DMP and you start making payments on your DMP, your credit counseling agency will start negotiating with your lenders. Stay in touch with your counselor to get updates on a creditor by creditor basis. Check your monthly statements from the credit counseling firm to see who is getting paid what.

How to Stay Current With Your Utah Debt Management Plan

It's important to always track your spending. When you are in a Utah debt management plan, it’s crucial to track your spending so you'll stay on budget. There are some good online tools to help you track your budget and spending. These tools are to someone in a Utah DMP as a speedometer is to someone driving a car. It's easy to speed, and it's also easy to overspend. Take advantage of free online personal finance tools like Mint that can help you keep your spending on track. Mint and some other tools not only have web apps but also have phone apps for Android and IOS. Such tools can almost automate the tracking of your spending and budget.

Set up your budget to set aside money each month for expenses that happen less often than monthly. Such expenses might include renters’ insurance for an apartment or oil changes for a car. Also, set up a savings plan for emergencies. One easy way to put aside some money is to use Chime or Acorns and use their round-up functions to add to your savings. These mobile banks are no fee banks that will round each charge up to the nearest dollar and put the change into your savings account for you. Even with such automated methods, make sure that you are hitting your savings goal to have enough for unexpected emergencies.

If you have an emergency expense and you don't have enough in savings to cover it, let your credit counselor know if it’s going to impact your ability to make your Utah DMP payments. Your counselor has seen similar situations with other clients and may have an idea you haven't thought of. Or, your counselor may be able to negotiate a suspension of your payment requirements so you can deal with this emergency.

Utah Debt Consolidation

A Utah debt consolidation is only a good solution if your credit score is high enough to get a loan that is large enough to pay off your unsecured debts like credit card debts and medical bills. Not only do you need to be able to get this loan, but your credit has to be good enough that the loan has a lower interest rate than the debts you are paying off with the debt consolidation loan. If your credit score isn't high enough for a successful consolidation, it’s a good idea to look at a Utah DMP.

Utah Debt Settlement

Utah debt settlements are a good solution if you have enough money to make large lump-sum payments to settle your debts for less than the full amount due. A debt settlement will hurt your credit since you aren't paying in full. For a debt settlement to be a good idea, you need a lot of money and you don't need to care about your credit. Usually, this would be because you already have bad credit.

Utah Bankruptcy

A Utah bankruptcy is a good solution when the other solutions won't work for you. With a few exceptions, bankruptcy can eliminate all the debt you want to eliminate. The main exceptions are student loans and some taxes. There are other solutions for those types of debts. In cases that don't require an attorney, we can help you to file your own bankruptcy. In cases that do need an attorney, we can help you find a qualified attorney in your area.



Written By:

Attorney John Coble

LinkedIn

John Coble has practiced as both a CPA and an Attorney. John's legal specialties were tax law and bankruptcy law. Before starting his own firm, John worked for law offices, accounting firms, and one of America's largest banks. John handled almost 1,500 bankruptcy cases in the eig... read more about Attorney John Coble

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