For appointments call 888-577-2227
www.lssmn.org/debt
What is a Debt Management Plan?
If someone is overextended with unsecured debts, a Debt Management Plan
(DMP) may be an effective way to gain control of the situation. Here are
some things you should know about a DMP:
♦ A DMP is not a loan. The client makes one monthly payment to us, which
we distribute to all creditors.
♦ Often, the monthly payments made to creditors through a DMP will be
lower than the payments currently required.
♦ Some creditors will reduce interest, stop fees and bring the account cur-
rent. Most creditors will stop their collection activities.
♦ Qualifications to enter a DMP include a balanced budget, a situation that
warrants outside help, and a DMP that benefits the client.
♦ In most cases, creditors require that all revolving debts be included
when entering a DMP. These accounts are closed once they are included
in a DMP.
♦ A DMP may show up in a client’s credit report. This could have a negative
impact on the client’s credit rating. It is important to know that Fair, Isaac and
Company, who produce the FICO credit score that many lenders use to determine
credit worthiness, are on record that they will not deduct any points from a score
for being in a DMP. Furthermore, if the client has been delinquent on accounts in
the past or is overextended, a DMP may actually improve their credit rating. We
recommend that the client talk to his/her bank or credit union with questions re-
garding their specific situation.
♦ Our DMP’s serve the dual role of helping a client repay debts in full and
helping creditors to receive the money owed them. It creates a win-win.
♦ Our funding comes from charitable and corporate grants, client fees for
some services, and voluntary contributions from creditors who partici-
pate in our Debt Management Plans (DMP). Because creditors have a finan-
cial interest in getting paid, most are willing to make a contribution to help fund
our service. These contributions ar