Best Debt Management Plans of 2025

What is a debt management plan?

A debt management plan (DMP) is a type of debt relief offered by credit counseling agencies. You’ll repay your entire debt balance at a potentially reduced interest rate or payment amount. You can enroll most types of unsecured debt in a DMP (excluding federal student loans), and it usually takes three to five years to complete.

Since you’ll make timely payments to repay everything you owe with a DMP, your credit score will typically improve over time. In contrast, debt settlement plans will often lower your credit score as you may be asked to make late payments (or stop making payments) and forgiven debt is reflected negatively on your credit report, potentially for many years.

» MORE: What affects your credit score?

Who should sign up for a debt management plan?

A DMP may be a good fit for individuals who have a steady income but are overwhelmed by high-interest unsecured debt, such as credit card balances or medical bills. If you’re struggling to keep up with minimum payments or feel like your balances aren’t decreasing despite regular payments, a DMP can help you regain control of your finances.

This option is best for people who:

• Have mostly unsecured debt
• Want to avoid bankruptcy
• Are committed to repaying their debts in full
• Need help negotiating lower interest rates or fee waivers
• Can commit to making a consistent monthly payment for three to five years  

It’s also a good choice for those who are seeking structure, accountability and access to financial counseling along the way. However, if you have irregular income or cannot commit to the monthly payments, another debt relief option may be more appropriate.

How debt management plans work

DMPs are designed to help you repay all your enrolled debts over a relatively short period of no more than five years. You’ll work with a credit counselor and you can enroll most unsecured debts, like credit cards, personal loans, private student loans and medical bills.

If you sign up for a DMP, this is how it typically works:

1. Get a free financial consultation. You’ll meet with a credit counselor, who will review your finances and offer advice. If you have a lot of unsecured debt, a DMP may be recommended. To sign up, you may need to pay a one-time fee of up to $75.
2. Choose which debts to enroll. You’ll benefit the most by enrolling debt with high interest rates or without structured repayment plans, like credit cards. You can’t enroll secured debt like mortgages and car loans, or federal student loans.
3. Start making payments. Once you’ve enrolled, you’ll begin making a single monthly payment to your credit counseling agency for all your enrolled debts. The agency will take its monthly fee out of your payment and distribute the rest to your creditors.
4. Possibly improve your rates and terms. The credit counseling agency may work with your creditors to negotiate lower monthly payments, reduced interest rates or fee waivers. This can allow you to put more money toward your principal.
5. Pay off everything in full. DMPs typically take three to five years to complete, assuming you make all payments on time and as agreed. If you don’t think you can make the payments, you’re better off not signing up, as the benefits negotiated on your behalf will be voided.

Once you’ve signed up for a DMP, you can often get ongoing support and advice from your credit counselor so you can manage your finances more effectively in the future.

“The credit counselor will continue to work with you over time to monitor your progress and make adjustments to your plan as needed,” said Levon L. Galstyan, a certified public accountant at Oak View Law Group.

How to choose a debt management plan

When choosing a DMP, the first step is to find a credible credit counseling agency. Read reviews, search for any recent legal actions against it and note the certifications held by it or its agents, such as designation as a certified credit counselor.

Also, consider how much you’ll pay in fees, when you pay the fees and the types of services you can receive. You should never be asked to pay for an initial consultation with a credit counselor; this first consultation should be free.

Once you agree to sign up for a DMP, you’ll pay a small enrollment fee of up to $75 and an ongoing monthly fee (also up to $75). State law often dictates the maximum fees these agencies can charge, which your credit counselor should disclose to you.

If the company is unwilling to provide you with disclosures or pressures you to sign up, these could be signs the company isn’t legitimate. You should be given time to consider your options, and the company should be readily able and willing to answer your questions.

If the credit counseling agency is operating a scam or engaging in fraudulent practices, you can file a complaint with either the Federal Trade Commission (FTC) or the Consumer Financial Protection Bureau (CFPB).

Alternatives to debt management plans

If you’re not sure a DMP is right for you, there are alternatives.

Note that you shouldn’t use your 401(k) or other retirement accounts as an alternative. Not only might you have to pay a tax penalty to access these funds, but you may set yourself back from your retirement plans.

Also, you might turn to a debt settlement plan in a worst-case scenario. However, this type of plan is risky because the goal is to settle your debt for less than you owe. While in some cases, debt settlement may be a good alternative to bankruptcy, it’s important to carefully evaluate other alternatives before considering debt settlement.