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

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In a Nutshell

A Wisconsin debt management plan should be crafted only after you and your credit counselor have completed a thoughtful review of your personal finances. Keep reading to learn how you can complete this review, consider all debt relief options available to you, and pursue a DMP if this option is the right one for you and your family.  

Written by Upsolve Team
Updated February 25, 2020

If debt has you running in circles and collection agencies are catching up with you, a Wisconsin debt management plan might serve as an effective solution to your financial woes. A Wisconsin debt management plan allows you to consolidate some of your monthly bills into a lump sum monthly payment to be distributed to your creditors by a credit counseling agency. Using a DMP, you’ll make a lump sum monthly payment to a DMP administrator based on agreed terms. You won’t have to pay multiple creditors directly anymore. First, you’ll talk to a credit counselor at a credit counseling agency about your personal finances so you can develop an action plan. Streamlining your debt in this way may allow you to pay off your unsecured debt quickly and at better rates than you’re paying now. 

If you have a steady income and can make your payments consistently, a Wisconsin debt management plan can help you pay off unsecured debts using a monthly repayment plan. It may be possible to arrange lower interest rates and lower minimum payment with each creditor in your Wisconsin DMP. 

A debt management plan is often a reasonable debt solution when you have unsecured debts like credit card debt, personal loans, and medical bills. Student loans may not be covered under a debt management program, and you will need to talk to your credit agency counselor about the specifics of your student loan and any Wisconsin payday loans you need to settle. Once you’ve made all the payments on your Wisconsin debt management plan, you can work on continuing to improve your credit score so you can qualify for new credit. 

Is a DMP the Same as a Debt Consolidation?

A Wisconsin DMP lets you consolidate your monthly payments from your unsecured debt—so it is a form of debt consolidation. A debt consolidation loan program is also a form of debt consolidation. What’s different? In the DMP form, you don’t take out a new loan to pay off your existing debt. If you use a debt consolidation loan to pay off your existing debt, you do take out a new line of credit before consolidating your existing debt. For instance, if you take out a home equity loan to pay off your credit card debt, you’re using a debt consolidation loan form of debt consolidation. If you make a monthly payment through a debt management program to pay off your credit card debt, you’re using a DMP form. 

You’ll need a decent credit score to take out a loan for debt consolidation. If you use your house as collateral on a new loan, you could risk losing your house if you suddenly can’t make payments. You will not incur new debt using the DMP form of consolidation, and there’s no risk of losing collateral.

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

A Wisconsin debt management plan should be crafted only after you and your credit counselor have completed a thoughtful review of your personal finances. Keep reading to learn how you can complete this review, consider all debt relief options available to you, and pursue a DMP if this option is the right one for you and your family. 

Find a Credit Counseling Agency

Credit consumer agencies aren’t all the same. Some agencies operate out of a traditional office building, some work only online, and others specialize in telephone counseling. Regardless, your first visit with an accredited nonprofit credit counselor will be free. To find a nonprofit credit counseling agency that can help with your Wisconsin debt management plan, you can start with the National Foundation for Credit Counseling (NFCC). The NFCC enforced high member standards developed by the Council on Accreditation (COA). These high standards aren’t always used by for-profit counseling companies. Only accredited credit counseling agencies can serve as NFCC members. 

There are credit counseling agencies that don’t follow the strict standards of the NFCC and COA, and it’s wise to ask questions before committing to working with any particular agency. You can ask a credit counseling agent if they work on commission. If they do, this is a warning sign. Ask the agency if they have free information on debt relief options. If they don’t, this is another warning sign. 

You can search for company reviews, complaints, and scams before committing to a particular agency. Government agencies keep track of complaints from consumer credit agencies and credit counseling agencies. You can review the Better Business Bureau website for complaints, and check out the latest scams the Federal Trade Commission (FTC) is tracking. The Wisconsin Department of Justice keeps track of lawsuits against unethical credit service organizations. 

What to Expect at Credit Counseling

When you first meet your certified credit counselor, you’ll participate in a free, one-time credit counseling session. Plan to be at the meeting for an hour unless you have very few bills and one source of income. No creditors will be contacted at the first meeting, you’re simply sharing financial information with the certified counselor to see if a Wisconsin DMP is the best debt relief option for you. 

Before you have your credit counseling session, collect your bills from your credit card accounts and other debt sources. Gather your income records for the past eight weeks. Review your credit card payments and interest rates. It will help the meeting go faster if you can bring a list of your total debt that includes the name of the company, the total owed, the amount you pay each month, the interest rate, and the collateral, if any. It would also help if you could show the counselor a list of your monthly expenses. 

The goal of your credit counseling session is to create a personalized action plan designed to help you reach your financial goals. The more information the counselor has regarding your personal finances and unique circumstances, the easier it will be to create an effective action plan. You and the counselor will talk about your income, debt, credit history, and your personal challenges. Your input is important so the counselor can get a clear vision of the best debt relief option for you. Don’t be afraid to ask questions. At the end of the meeting, you’ll have a clear action plan to help you reach your financial goals. This action plan may or may not include a recommendation to start a DMP. 

Making the Decision & Getting Started

Take some time to think about your Wisconsin debt management plan before you hunker down into making a big commitment. There are several different ways to manage your debt. If you don’t think you can make the monthly payments you and your counselor discussed, and/or you’re also concerned about your mortgage or car payment, give some thought to discussing your finances with a bankruptcy lawyer. Be sure to consider all debt relief options before you decide to stick with your Wisconsin DMP. 

If you’re feeling good about the debt management plan, ask yourself if you’ve reviewed all the fees the counseling organization charges. Make sure you’ve discussed Wisconsin state law limitations on fees, set up fees, late fees, and monthly fees that are on top of your monthly debt payment. Make sure you add those fees to the amount you’re paying monthly to manage your debt. Make sure you can afford the monthly payments and stick to the budget. Don’t be afraid to ask for a lower monthly payment. A lot can happen in a few years. Are you prepared?

Put Together Your Wisconsin Debt Management Plan

To put together your Wisconsin debt management plan, you will provide your credit counselor with more documents concerning your debt and expenses. This will help plan for due dates, lump sum monthly payments, and timelines. There may be legal obligations that have to be dealt with carefully. You and your credit counselor will figure out a lump sum monthly payment you can afford, the best due dates for the monthly payments, and a timeline to pay off your debt that is included in your Wisconsin debt management plan. By reviewing your income, expenses, and bank account statements, you’ll also find the best time to make your first payment on your DMP. 

Begin Payments

Your Wisconsin debt management plan payments will begin (usually) after you sign an agreement for the payment schedule. The credit counseling service will confirm the terms of the agreement with your creditors. To be safe, give the counselor a call and double-check the date for your first payment and verify with the counselor that creditors have accepted your plan. 

Your credit report will reflect your participation in a debt management program, so you can expect a temporary negative impact on your credit score while on the DMP. At the end of your debt management plan, your DMP will have a positive impact on your credit because it will show you have paid your debts in full. 

How to Stay Current with Your Wisconsin Debt Management Plan

Craft a personal plan for payment success before you sign off on your Wisconsin DMP payment schedule. What life circumstances could impact your ability to stick to your DMP? Your Wisconsin DMP can age well if you plan for emergencies before you confirm your payment schedule with your credit counselor. Review your life from last year. What kind of emergencies did you face? How about over the last five years? Talk to your counselor about setting aside money for emergencies, so you don’t have to make the choice between rent or paying on your DMP. 

Also, look at the happy events that happened over the last year. Did you have a birthday celebration for a friend or loved one? Set aside money for your entertainment expenses. It’s easier to stick with payments when your life has joy. You should also have a system in place to track your DMP payment due dates and payment history. It’s easy to forget a payment when life gets busy. Set up your DMP reminders in advance, before the first payment is due. 

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Wisconsin Debt Consolidation

Choosing a Wisconsin debt consolidation loan alternative may be a better debt relief option for you if your credit score has aged well despite your struggles. With a debt consolidation loan, you’ll streamline your debt by using a new line of credit as a balance transfer to pay existing debt. This option will allow you to avoid working with a credit counseling agency in an ongoing capacity, which may be attractive to you if you prefer to handle your finances in a particularly private way. 

Wisconsin Debt Settlement

Wisconsin debt settlement is a debt relief program that lets you pay less than what you owe before closing your account with a creditor. A debt settlement agency will negotiate with creditors to determine what percent of your debt you’ll have to pay. In a debt settlement plan, you’ll pay a fraction in a lump sum payment, and the creditor will give you a pass on the remainder of the debt. Your account will then be closed. If the amount you didn’t pay is over $600, you’ll be stuck paying taxes on the money you didn’t have to pay to the creditors. Note that your credit report will show that you didn’t pay all of your original debt.

Wisconsin Bankruptcy

If you’re stuck in a blizzard of debt and your income can’t pull you out, look into filing a Chapter 7 Wisconsin bankruptcy or discussing a Chapter 13 bankruptcy with an attorney. Bankruptcy is a reasonable debt relief option when medical bills are past the overwhelming stage, collection calls fill up your voicemail, or when you’re plagued with judgments and wage garnishments. A Wisconsin bankruptcy attorney with experience in Chapter 7 bankruptcies can give insight into your personal bankruptcy options. If you’re interested in learning how to file bankruptcy on your own to save a few bucks on attorney fees, Upsolve can walk you through the bankruptcy process.

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