Managing multiple debts can be overwhelming, but a Debt Management Plan (DMP) can be a lifeline for individuals striving for financial stability. A DMP is a structured repayment plan set up by a credit counseling agency, designed to make debt repayment more manageable. However, not all debts qualify for inclusion. In this post, we will explore which debts can and cannot be incorporated into a DMP, helping you make informed decisions about managing your financial obligations.

Debts Which CAN Be Included in a Debt Management Plan:

credit-cards-stacked-mastercard-visa-american-expressCredit Card Debts:

Credit card debts are the most common type of unsecured debts included in DMPs. By establishing new terms with creditors, credit counseling agencies can often lower interest rates, reduce monthly payments, and waive late fees, making it easier for consumers to pay off their balances.

Unsecured Personal Loans:

Unsecured personal loans, which do not have collateral backing, are also typically eligible for a DMP. These include loans from banks, credit unions, or online lenders that are not tied to a specific asset like a house or car.

Medical Bills:

past-due-billOverwhelming medical bills can be a significant financial burden, but they are generally eligible for inclusion in a DMP. A DMP can consolidate these bills into a single monthly payment, often with reduced interest and fees.

Store Cards:

Store cards, which are essentially credit cards issued by retailers, can usually be incorporated into a DMP. As with credit card debts, this can result in lower interest rates and fees.

Collection Accounts:

Debts that have been sold to a collection agency can often be included in a DMP. However, negotiating with collection agencies can be challenging, and the success of including such debts can vary.


Debts Which CANNOT Be Included in a Debt Management Plan:

Secured Loans:

cars-for-sale-on-a-lotSecured loans, such as mortgages and auto loans, cannot be included in DMPs as they are backed by collateral, and defaulting on such loans can lead to foreclosure or repossession.

Student Loans:

Federal student loans and most private student loans are generally excluded from DMPs. However, separate income-driven repayment plans and consolidation options are available for student loans.

Tax Debts:

Tax debts owed to the government are not eligible for inclusion in a standard DMP. Individuals owing tax debts may need to explore other options such as an installment agreement with the IRS.

Legal Fines and Restitution:

lady-justiceFines, penalties, and restitution imposed by a court are not eligible for a DMP and must be addressed separately.

Child Support and Alimony:

Child support and alimony obligations are legal responsibilities and cannot be included in a DMP.


In Conclusion:

Understanding which debts can be included in a Debt Management Plan is crucial for assessing whether this approach is suitable for your financial situation. While DMPs can be instrumental in managing unsecured debts like credit card debts, personal loans, and medical bills, they are not a one-size-fits-all solution for all types of obligations. For debts that are typically excluded from DMPs, such as secured loans, student loans, and tax debts, exploring alternative repayment options and seeking professional advice is essential for achieving financial stability.

About the Author

Eric has amassed extensive experience in the financial and credit counseling sector, dedicating numerous years to this industry. Presently, he serves as a certified credit counselor at Debt Reduction Services, leveraging his expertise to assist individuals in managing their debts effectively. Throughout his career, Eric has consistently exhibited his commitment to empowering consumers with the knowledge and tools necessary to navigate their financial challenges.