Debt management plans: how they work

Updated November 8, 2026

A debt management plan (DMP) is an agreement, arranged by a nonprofit credit counseling agency, in which your credit card issuers lower your interest rates and you repay what you owe in one monthly payment to the agency, usually over 3 to 5 years.

How it works

1. A certified credit counselor reviews your income, expenses and debts, usually for free.
2. If a plan fits, the agency proposes it to your creditors. Many card issuers agree to lower rates and waive late fees for people on a plan.
3. You pay the agency one amount each month, and it pays your creditors.
4. The cards on the plan are usually closed.

What it costs

Nonprofit agencies typically charge a small setup fee and a modest monthly fee, limited by state law in many states. Ask for the fees in writing before you start, and walk away from any agency that wants a large payment upfront.

Effect on your credit

A DMP itself isn't a negative mark, but closing cards can lower your score for a while by reducing your available credit. Paying on time every month through the plan helps your credit recover.

Choosing an agency

• Look for a nonprofit that's a member of the National Foundation for Credit Counseling (NFCC) or the Financial Counseling Association of America (FCAA).
• Make sure the counselors are certified and that the agency is licensed in your state where required.
• A good counselor will also tell you when a plan isn't the right fit, for example when bankruptcy would leave you better off.