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

Find a Credit Counseling Agency

Before you create a Washington debt management plan, you’ll need to find a trustworthy credit counseling agency to act as an administrator for your DMP. These agencies and their counselors must be licensed if they are operating in Washington. You can pick between a for-profit or nonprofit credit counseling agency but for-profit counseling agencies charge their consumers for their services, and nonprofit agencies don’t charge a fee for their initial consultations. Nonprofits offer free credit counseling consultations that you can use even if you decide not to use their professional services, so seeking one out is an advisable first step. Remember that while an initial credit counseling session provided by a nonprofit credit counseling agency will be free, services like DMP administration do generally come with fees. Before you work with a nonprofit credit counseling agency to construct a DMP, you can ask questions about how you’ll meet, fees, what happens if you can’t afford fees later, and the compensation method for counselors – commission-based counselors may try to sell you on pricier services for their own benefit. 

When finding a credit counseling agency, you should do some research to better ensure that any agency you’re interested in working with is reputable:

• See if the company is in good standing by checking with the Better Business Bureau. 

• The Washington Attorney General’s website will feature any complaints filed against the agency by Washington residents, 

• For nonprofits, make sure the agency you choose is a member agency of the NFCC (National Foundation for Credit Counseling), the  largest nonprofit financial counseling organization in the United States. The NFCC only accepts members certified by an independent company, the Council on Accreditation (COA), as employing best professional practices. 

Make sure you do your research before making your final decision. If you aren’t comfortable with the agency at any point in the counseling process, go somewhere else.

What to Expect at Credit Counseling

Washington credit counselors can advise you on a variety of topics including personal finance, bankruptcy, bankruptcy alternatives, improving consumer credit, and debt management programs. The goal of your initial, no-cost credit counseling session is to discuss your financial situation and create a plan to get your finances back on track. Your initial counseling session will conclude with your counselor offering personalized recommendations for your financial well being. 

You should gather some basic documents before your initial session to make the conversation as productive as possible. You’ll want information regarding your:

• Income, 

• Expenses (utility and mortgage bills, cell phone bills, etc.), and 

• Debts. 

Create a list of secured and unsecured debts you owe to each creditor, interest rates on each of those debts, and the minimum payment each creditor requires. A free copy of your credit report will have a great deal of account and debt information and will serve as a helpful tool as you gather this information. Though your counselor can make recommendations about debt solutions that may work for you, the final decision concerning how to proceed is yours. Remember you don’t have to decide immediately, and it’s not a good sign if your credit counselor pressures you to make a decision at the end of the counseling session or pushes you towards a specific solution. However, if a licensed credit counselor tells you that you’re a good candidate for a Washington DMP, this advice is probably very solid and you may want to strongly consider this option.

Making the Decision & Getting Started

Before you make a final decision about entering into a Washington DMP, ask any questions you may have. When it comes to fees, does the agency charge an initial set-up fee or a monthly fee to administer your plan? If so, how much? These fees are legal in Washington, usually amount to no more than $50 per month, and are built into your monthly payment amount. Washington also has laws limiting fees that a for-profit agency or debt relief company can charge: the total fee for adjusting services can’t exceed 15% of the total debt you list – including fees by any company administering the money you pay towards your debts. Ask if your agency has a good working relationship with any of your creditors. Having a positive, established relationship can make contacting creditors easier and make acceptance of your plan go more smoothly. 

Make a budget and then think about whether your budget is realistic and you can afford the payments every month.  If you break from your Washington DMP, the penalties and default interest rates that follow could leave you much worse off financially than before you started the DMP. Also, remember to look at all your options. Not every solution works for everyone. In some cases, bankruptcy may be the best choice to erase most or all your outstanding debt. If you have questions about bankruptcy, Upsolve can help you find a Washington bankruptcy lawyer so you can better assess whether this option might be right for you.

Put Together your Washington Debt Management Plan

Your credit counselor will ask for a lot of very detailed financial information from you while creating your Washington debt management plan to make it as comprehensive, effective, and realistic as possible. The information they need is more detailed than what you brought to your initial counseling session:

• Bank account information, 

• Detailed credit card information, 

• Current loan statements, and 

• Cardholder agreements from your credit cards. 

If you don’t have the agreements your credit card companies mailed to you, contact them for a copy or look it up online. Your counselor will need your specific account terms when they contact your creditors, and the agreement lays out those terms. 

Go back over your Washington DMP and the financial documents used to create it. Are the due date and payment amount realistic for you to handle every month? Did you leave off any expenses from your budget, however small? Think seriously about whether you will be able to stick to your budget for the next few years. If there are any nagging questions or any details still bother you (no matter how small), now is the time to say something. Your final plan will be sent to your creditors, and once they accept the plan you are usually locked into those terms until your debt is repaid. 

Begin Payments

You’ve worked hard to put a Washington debt management plan in place; now your main job is to make your monthly debt payments (on time and in full) until you are free and clear of your consolidated debt. You should receive your payment due date and monthly payment amount from your credit counselor before your DMP kicks in. Mark them on your calendar or set a reminder on your phone, but do not forget to make these payments. Pay on time every month. Pay early if possible and consider making extra payments if you come into additional income. Failure to make your payments on time could leave you in a very precarious financial position. Your counseling agency will reach out to creditors to secure acceptance of your Washington DMP once you start making payments. If you don’t get a response right away, don’t worry. It takes time to establish communication and agreement. Just keep making your payments in the meantime.

How to Stay Current with your Washington 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 have examined your finances and created a realistic plan for what you could spend while still affording your payments. Don’t let that work go to waste. Stay on budget, track your spending to avoid needless expenses, and set aside money both for emergencies and large, expected expenses. 

If an emergency expense comes up and you think you need to use credit to cover it, wait until you talk to your counselor and confirm that your use of credit won’t violate the terms of your Washington DMP. DMPs generally prohibit new credit and taking on any new debt until everything is paid off. Also, if there are any changes to your income or expenses, contact your counselor right away because it is far better to be proactive than reactive when it comes to the success of a DMP. 

Finally, don’t forget to find ways to celebrate milestones of progress as your debt shrinks. You can ask your counselor to alert you when you’re approaching one so you can mark it on your calendar and enjoy the progress you’ve made. Staying motivated helps to ensure that you continue to make all of your payments on time.