Debt Management Program

What is a Debt Management Program (DMP) and Will It Work for Me?

If you’re struggling to pay your bills and are constantly feeling stressed about your finances, a Debt Management Program (DMP) may be an ideal solution to help you get back on track and actually get out of debt.

But what is a Debt Management Program and how does it work? A DMP is a voluntary arrangement between you, your creditors, and the Credit Counselling Society that helps you get out of debt in a reasonable amount of time.

In a Debt Management Program – also called a debt repayment program – all of your unsecured debt payments such as your credit cards, payday loans, overdrafts, personal loans, or lines of credit, are combined into a single, affordable payment so you can focus on paying off what you owe. Your creditors support the program by waiving or dramatically reducing ongoing interest charges.

Debt Management Program Highlights:

  • It’s a voluntary arrangement and will not be reported as a legal matter on your credit report
  • It combines all of your unsecured debt payments into a single monthly payment
  • Your creditors will typically reduce or completely eliminate the interest rate on your debts going forward so that you can be debt free within 5 years
  • You get ongoing support, and should something unexpected happen while you’re repaying your debts through a DMP, you’ll be helped to determine you best next step
  • It will impact your credit positively or negatively, depending on your individual situation. You can be helped you rebuild your credit rating afterwards if that’s what you need.
  • About 90 per cent of DMP clients successfully make their payments every month
  • It’s one of the most private debt relief options. Unlike filing for insolvency (such as with a consumer proposal or bankruptcy), no legal records are created, and no public evidence of the program is ever created. The only people who know about the program are you and your creditors.
  • Two years after you finish the program, all records of it will be erased from your credit report.

How are Debt Management Programs Set Up?

It starts with you and your Credit Counsellor reviewing your whole situation confidentially. This includes, what caused you to get into debt, what types of debts you have, how much income you have and what your expenses are, and what your budget looks like. If you and your Credit Counsellor determine that a DMP is the best solution to fit your individual needs, they’ll manage the paperwork to get the program started.

When the paperwork is drawn up, the Credit Counsellor sends proposals to your creditors on your behalf, asking them to accept a prorated payment amount for up to five years. This gives you a realistic amount of time to repay your debts without the process taking too long and having debt fatigue set in.

How Do Creditors Feel About a DMP?

Because your Credit Counsellor has longstanding relationships and national agreements with most creditors, they tend to respond quickly and positively to their DMP proposals. If a creditor has concerns or questions, your Credit Counsellor will work with them to get them on board so that you’re off to a good start. Once creditors give them the green light, you stop making individual payments to each of them involved in the DMP – instead, you’ll start making one single lump sum payment to your Credit Counsellor each month. Your Credit Counsellor takes that single payment and disburse the amount to all of your creditors.

If you’re receiving collection calls from your creditors, these will stop when you start the DMP.

What Are the Chances You’ll Successfully Complete a DMP?

About 20 per cent – or one in five – Canadians who go to a Credit Counsellor for help have situations where they choose to establish a DMP. It’s not the right debt consolidation option for everyone, and they’ll tell you up front if they don’t think it’s the right fit for your situation.

It works, and it is a sustainable solution: nearly 90 per cent of clients with a DMP successfully make their payments every month. And only 0.1 per cent of people who successfully complete the program go back in search of financial help again – an incredibly promising sign that the program not only eliminates debt but teaches you the skills you need to manage money successfully on your own in the future.

What Happens After Your Debt Management Program is Paid Off?

When you’ve completed your Debt Management Program and have paid off your debts, your Credit Counsellor take care of finalizing things with your creditors, and reporting to the credit bureaus – Equifax and TransUnion, that you’ve paid off your debts through a DMP.

Two years after you successfully completing the program, or 6 years from the start (whichever is sooner) the debts repaid through the DMP are removed from your credit report – your Credit Counsellor ensure this happens, too.

We Want Our Clients to Be Able to Re-Establish Their Credit Rating

If you need help re-establishing your credit rating, your Credit Counsellor can assist with this. Your Credit Counsellors can help you get an unsecured credit card to rebuild your credit rating; and if needed, they can give your bank or credit union a letter explaining the program and your success.

One of the Secrets of Success is Your Partnership with Your Credit Counsellor

Throughout the process, you’re paired with a Credit Counsellor who will not only help you stay on track with your DMP, but will teach you long-lasting money management skills.

While the primary goal of a Debt Management Program is to streamline debts and tackle them as a single payment, your Credit Counsellor will also work with you to develop a realistic budget (which is crucial to successfully completing a DMP), set short and long-term savings goals, and help you understand what your triggers are with spending.