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Pros and Cons of Debt Management Plans

A debt management plan can help you tackle your debt, but it may take five years

If you are overwhelmed by your debts, you’re not alone. The average American has more than $92,000 in debt, including credit cards, student loans, and personal loans.  If you’re struggling to pay off your balances, one option is to work with a nonprofit credit counseling agency and enroll in a debt management plan. With this approach, you can pay off your debts in five years or less and get other help managing your money. However, debt management plans are not for everyone, and there are some downsides to consider. Here’s what you need to know. 

Key Takeaways

  • Debt management plans allow you to pay off your debt in five years or less.
  • To start a debt management plan, you need to work with a nonprofit credit counseling agency.
  • There may be enrollment and maintenance fees to take part in a debt management plan.
  • Debt management plans are only for unsecured forms of debt, such as most credit cards.

What Is a Debt Management Plan? 

When you enroll in a debt management plan, you’ll work with a nonprofit credit counseling agency. Your counselor will contact your creditors to gain their participation and may be able to get them to reduce your interest rates, lower your monthly payments, or waive their late fees. A counselor can also help you create a budget, reduce your expenses, and better manage your money. 

Under a debt management plan, you’ll make just one monthly payment to the credit counseling agency rather than paying your creditors directly. The counseling agency will disburse the money to your creditors on your behalf, based on a payment schedule they agree on together.

Debt management plans require consistent monthly payments. They usually take three to five years to complete, and you must agree not to use or take on any additional credit during that time. At the end of your debt management plan, your accounts will be completely paid off, and you’ll be debt-free.

The Pros and Cons of Debt Management Plans


  • Become debt-free within five years: Under a debt management plan, you typically pay off all of your existing accounts within five years. 
  • Simplify your payments: Instead of having multiple payments and due dates to remember, you’ll make just one payment to the credit counseling agency. Having only one payment can make it easier to manage your money. 
  • Improve your credit score: As you start making payments under the debt management plan, you may gradually improve your credit score.


  • Lose access to credit cards: To ensure you don’t rack up additional debt, credit counseling agencies will require you to stop using or even close your existing credit cards. Going forward, you’ll rely solely on cash and debit cards until your debt is paid off. 
  • Cannot open new lines of credit: While enrolled in a debt management plan, you cannot open any new lines of credit, so you can’t use an auto loan to buy a car or a personal loan to renovate your home.
  • Creditors may not participate: Not all creditors will agree to participate in a debt management plan. If creditors refuse to be included, then the plan will be less effective. 

3 Credit Counseling Agencies to Consider

There are many credit counseling agencies in operation. While there are typically enrollment and maintenance fees, some agencies will waive those fees in certain circumstances. 

Below are three nonprofit credit counseling agencies that offer debt management plans in all 50 states: 

Credit counseling agency Costs
American Consumer Credit Counseling $39 enrollment fee; $7–$70 monthly maintenance fee
Consumer Credit Counseling Service (CCCS) Enrollment and monthly maintenance fee (varies by location)
Navicore Solutions $50–$60 enrollment fee; minimal monthly maintenance fee

Bear in mind that scam artists sometimes pose as legitimate credit counselors. When evaluating potential agencies, make sure they are nonprofit organizations. It’s also a good idea to check each one you’re considering with your state attorney general and/or your local consumer protection agency. The United States Trustee Program also has a list of agencies that may be good matches for you. 

Alternatives to Debt Management Plans

While debt management plans can be effective tools for repaying your debt, they’re not always the best strategy. For example, secured debts and student loans aren’t eligible for debt management plans, and credit counseling agencies may cap how much debt you can have to participate in one. 

If a debt management plan isn’t the right fit for you, then consider these alternative strategies: 

  1. Debt consolidation: With debt consolidation, you take out a personal loan and use it to pay off your existing accounts. With a lower interest rate and fixed monthly payments, a debt consolidation loan can help you save money and accelerate your repayment. 
  2. Debt settlement: Debt settlement is a risky strategy where you stop making payments in the hope that your creditors will settle for a smaller amount. 
  3. Bankruptcy: If your debt is more than you can reasonably pay off, then filing for bankruptcy can remove your obligation to repay all of it. However, bankruptcy will remain on your credit reports for seven or 10 years, depending on the type of bankruptcy, and make it difficult for you to borrow in the future. 

If you aren’t sure which approach is best for your situation, contact a nonprofit credit counseling agency and talk with a counselor about your options. 

Article Sources

Investopedia requires writers to use primary sources to support their work. These include white papers, government data, original reporting, and interviews with industry experts. We also reference original research from other reputable publishers where appropriate. You can learn more about the standards we follow in producing accurate, unbiased content in our editorial policy.
  1. Experian. "Average U.S. Consumer Debt Reaches New Record in 2020." Accessed Feb. 14, 2022.

  2. Federal Trade Commission. "Coping With Debt." Accessed Feb. 14, 2022.

  3. Consumer Financial Protection Bureau. "How Can I Tell a Credit Repair Scam From a Reputable Credit Counselor?" Accessed Feb. 14, 2022.

  4. Experian. "How Long Does a Bankruptcy Stay on Your Credit Report?" Accessed Feb. 14, 2022.