If you use a debt management plan to eliminate your debt problems, each month you will deposit the agreed upon payment with the debt management organization. The organization then uses your deposit to pay down your unsecured debts such as credit card bills, medical bills, and retail store debt. The counselor works with you and your creditors to develop a debt management plan tailored to your needs. If possible, the organization will get your creditors to agree to lower the interest rate and to waive certain fees or penalties. As an example, a credit card company may be willing to lower the interest rate back to what you had before you got into trouble by missing payments. Most credit card companies automatically raise interest rates to their maximum if you miss a payment. You also would have incurred late fees and other penalties. Again, the credit card company may waive these fees if it feels that you are willing to work with a debt management plan and pay off the original debt. Most credit card companies will agree to this only if you don't apply for or use any additional credit while you are paying them off through the debt management plan.

How to Determine if a Debt Management Plan is Right for You
First and foremost, work with the counselor. Without your honest assessment of your particular situation the counselor can not determine the best debt management plan for you. Make sure you can afford the monthly payments. If not, have the counselor lower the payments by extending the payoff time. This will cost you more in interest, but it is better than missing a payment. You will also have to determine which debts are included in the plan. Any debts not included will have to be paid by you each month. Some of your creditors may require that you make the first payment to the debt management organization before accepting the debt management plan. If this happens, the credit counselor will tell you which company has this requirement so you can call and verify the information. Before you sign the contract, read it carefully and make sure all the agreements you reached with the debt management organization over the phone are included in the written contract. Finally, ask yourself, if you are truly committed to getting out of debt. That is the biggest factor in making a debt management plan work for you.

What do I have To Do To Make A Debt Management Plan Work for Me?
Continue to pay your bills until the plan has been approved by your creditors. If not you will end up with more late fees and other penalties. Stay in contact with your creditors, especially if you can not make the full payment on time. Let them know that you have signed up for a debt management plan. Once the plan is approved, make regular payments. The debt management organization must receive your payment 3-5 days before your creditors are expecting payment. This will be spelled out in the contract. If payments to your debt management plan are not made on time, you will probably find yourself back at square one, losing the benefits that the plan gave you such as lower interest rates and fee waivers. Creditors agreed to them expecting regular payments. If they don't get payments on time they will start adding late fees again.

Conclusion
A debt management plan is a valid way for those unable to manage their credit situation to get out of debt and to re-establish a good credit rating. It takes work and commitment on your part. With that commitment you will be amazed at how fast you are on the road to a debt free life.