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

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In a Nutshell

A Vermont DMP isn’t a lightning quick way to pay down debt, it’s a slow and steady process like getting maple syrup from the farm to the table. If you’re interested in learning more about whether pursuing a DMP is right for you, this guide will give you a strong sense of the Vermont debt management program process.

Written by Upsolve Team
Updated February 20, 2020

You’re never too old or too young to obtain a fresh start with your personal finances. If you’re having financial trouble, don’t wait until things get grim to get help. A Vermont debt management plan could be the debt relief solution you need to regain firm financial footing. A Vermont debt management plan allows you to reduce your unsecured debt while making minimum lump sum monthly payments. You’ll be able to send your payments to a debt management plan administrator instead of sending out a bunch of payments to individual creditors. During the debt management plan process, an agent will talk to creditors and try to work out lower interest rates and lower minimum payment amounts. You’ll make payments until your debt under the plan is paid off. This could take a few years. The first step will be to talk to a credit counselor so you can put an action plan into place. 

A debt management plan (DMP) can help you with credit card debt, medical bills, personal loans, and other types of unsecured debts. Not every type of unsecured debt can be paid through a debt management plan. Your personal credit counselor can review the details and let you know if you can include any student loans in your Vermont debt management program. Payday loans are illegal in Vermont, but you can ask your credit counselor for advice on how to manage internet-based payday loans. 

There are other debt solutions to help you if you’re behind on payments for your secured debt, like your mortgage or car loan. You can speak with your credit counselor about managing these specific financial challenges. If you’re behind on your house or car payments, don’t be afraid to talk to an attorney about bankruptcy or look into other debt relief solutions. 

Is a DMP the Same as a Debt Consolidation?

A debt management plan (DMP) and the more commonly known debt consolidation loan are both forms of debt consolidation. They are both strategies for debt relief. In a DMP, you're consolidating smaller monthly payments from multiple bills into one lump sum monthly payment. With a debt consolidation loan, you consolidate debt balances and take out a new loan to pay those balances. You don’t have a new loan or new debt when using a Vermont debt management plan. Under either circumstance, you’re restructuring your debt and paying it off with a single, monthly payment plan.

You’ll need a favorable credit score to qualify for a debt consolidation loan and a steady income for a DMP. You may lose access to existing forms of credit when using a DMP. A debt consolidation loan would keep your credit availability intact, but the new loan may affect your credit score. Mortgage refinances and home equity loans are also types of debt consolidation, but these forms put your home at risk if payments aren’t made on time. 

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

A Vermont DMP isn’t a lightning quick way to pay down debt, it’s a slow and steady process like getting maple syrup from the farm to the table. If you’re interested in learning more about whether pursuing a DMP is right for you, this guide will give you a strong sense of the Vermont debt management program process.

Find a Credit Counseling Agency

A highly respected source for nonprofit credit counseling organization information is the National Foundation for Credit Counseling (NFCC). The NFCC is a great place to start your search for a credit counseling agency to administer your DMP. The NFCC works with the Council on Accreditation (COA) to develop standards for nonprofit credit counseling agencies that include higher standards in training and ethics than many for-profit counseling services adhere to. Accreditation by the COA can be viewed as a promise to you that you’ll be working with a credit counseling agency counselor that’s educated in financial management, abides by laws, and follows strict standards to keep your information confidential. 

Some credit counseling agencies operate out of local offices, some are online, and others make their services available by phone. Your first meeting with a nonprofit credit counselor is free, and it’s a great investment of your time. Even if you decide not to pursue a Vermont debt management plan, you’ll get some sound advice on debt relief options during your no-obligation credit counseling session.

If you’re considering looking into a for-profit credit counseling organization, scam information is on the website for the Federal Trade Commission (FTC). You can also research scams on the website for the Better Business Bureau. Vermont had over 3,000 fraud complaints during 2018, according to the Federal Trade Commission. You can also check with the Vermont Attorney General office to look into a credit counseling agency’s reputation. 

You can interview credit counselors to get a feel for their credibility. You can ask a credit counselor if they accept a commission, where they were trained, and if they have free information on debt relief solutions available. You can also ask the counselor what the fees and costs will be for a Vermont debt management plan. If the counselor is resistant to give you information, call another credit counseling agency. 

What to Expect at Credit Counseling

Your credit counseling session with a certified nonprofit credit counselor is confidential. The meeting shouldn’t run over an hour, and it’ll operate as a discussion about your finances, debt, and debt relief options. The counselor will go over alternative debt relief solutions with you. You might find that filing for bankruptcy or using a debt settlement plan are better options for your particular situation. 

Before your meeting, collect statements pertaining to your debt, expenses, income, and assets for your credit counselor to review. You and the credit counselor will determine long-term and short-term personal financial goals. This will help build your action plan for managing your debt specifically and your finances generally. Even though this meeting is free, and you’ll gain insight into all of the debt relief solutions available to you. You’ll get the direction you need to get started on a Vermont DMP or an alternative debt relief option. 

Making the Decision & Getting Started

Before you commit to pursuing a Vermont debt management plan, make sure you’ve reviewed all the fee information with your counselor. Have you asked the credit counseling agent about agency set-up fees for the DMP, monthly fees charged by the credit counseling organization, and fee maximums set by Vermont laws? Can you stick to the terms of your Vermont DMP, or will an emergency cause you to fall behind? Make sure you have an emergency fund set aside so you can stick with your DMP. 

Committing to a Vermont debt management plan is a big step. Review all your budget and debt relief options before you commit. If you’re worried about not being able to make timely payments due to lack of funds or you’re at risk of having your house go into foreclosure, consider taking some time to speak with a bankruptcy attorney. Once you’ve reviewed the extra fees, your emergency fund, other debt relief options, and the reality of you sticking to your budget, you can decide whether you're confident moving forward with a Vermont DMP. 

Put Together Your Vermont Debt Management Plan

Before you finalize the terms of your Vermont DMP, you’ll need to collect more details about your debt. In addition to information concerning the terms of the debt you plan to consolidate, the credit counseling organization will need copies of your bank statements and the details of your credit card payments and credit card agreements. Bank statements will help the credit counseling agency confirm your assets and establish due dates. Credit card agreements provide the details that financial counselors need to work with before they negotiate payments and lower interest rates. You’ll need to collect agreements for the non-credit card debt you plan to consolidate.

To put together your Vermont debt management plan, you and the credit counseling agency will review your financial documentation to determine the best due dates for your monthly lump sum payments, a timetable for your goals, and a schedule that includes the date for your first DMP payment. 

Begin Payments

Your Vermont DMP payments will start according to the date listed in your signed payment schedule agreement. Take time to confirm creditor acceptance of the payment plan with your DMP administrator and confirm your first payment date with your counselor before you begin payments. Note that your credit report will show that you're using a debt management plan to relieve your debt. You might see some ups and downs in your credit score as your balance changes and credit bureaus record the changes. The debt management plan will have a temporary negative impact on your credit report, but as your balance decreases and is paid off, your participation in your DMP will have a positive impact on your report. 

How to Stay Current with Your Vermont Debt Management Plan

Prepare yourself with a solid action plan to protect yourself from defaulting on your Vermont DMP. If you stop paying your Vermont debt management plan, you may end up with higher interest rates and a pile of default fees. Just as you bundle up before going outside in a snowstorm to protect yourself, you can protect yourself from falling into default by having plans to guard against late fees and missed payments. 

Put a tracking system in place to monitor due dates. Give yourself a red flag warning before the payment is due. You can use calendars or budget apps to help manage your reminders and payments. Do something enjoyable for yourself after a payment is made and keep reminding yourself of your goal. Consider a special celebration after you make the payment that’s the half-way mark to debt-free living. 

Also, remember that even with an organized calendar system in place to manage your DMP payments, emergencies can happen. Don’t sign the payment schedule until you go over emergency funding with your financial counselor. It’s important for you to have money left over to take care of emergencies so you don’t miss a DMP payment. Make a point to look for the odd places in your yearly budget. Some months are more stressful than others because of taxes, holidays, car insurance, or student loans. Take timing into consideration when making your payment schedule. If your income is paid monthly, the weeks furthest from that income may be more stressful. Plan to set aside money for your Vermont DMP payment as soon as your income is available. Make making DMP payments effortless and your plan will be a success. 

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Vermont Debt Consolidation

You may want to consider an alternative form of Vermont debt consolidation if you currently have a good credit score. You’ll have to qualify for new credit if you use a Vermont debt consolidation loan to pay off your old debt. With a DMP, your credit score will show you made payment arrangements, and you’ll have to wait until your debt is paid to really buff up your credit score. In a debt consolidation loan plan, your credit score will show you paid off the old debt but that you have a new loan. You can save money with a debt consolidation loan if you use a low interest rate loan to pay off high interest rate accounts.

Vermont Debt Settlement

Vermont debt settlement is an alternative debt relief option that may be worth considering if you have access to assets that you can use to settle one or more of your debts quickly. You’ll need money to pay a creditor a lump sum portion of the total debt owed. Using the debt settlement process, you’ll have part of your debt forgiven. You’ll pay a percentage of your total debt in a lump sum debt payment, then your account will close. Be aware that there are debt settlement companies that are slick scam artists, so be sure to research this type of debt relief company thoroughly if you decide to pursue this debt relief option.

Vermont Bankruptcy

If your debt feels like an avalanche and your monthly income can’t dig you out, consider filing for a Chapter 7 bankruptcy or Chapter 13 bankruptcy. Bankruptcy laws were created to help people get a fresh start. If you’re trying to get back on your feet, bankruptcy can stop calls from collection agencies and can eliminate your eligible debt. You can talk to a Vermont bankruptcy attorney to learn more about how bankruptcy may benefit your financial situation. If you’d rather work independently and file for Chapter 7 bankruptcy on your own, Upsolve provides valuable resources to guide filers through this process.

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