Can't Afford Debt Management Plan

Borrowing to make payments for a dmp is just wrong....it is only putting you further into debt. If you cannot increase your income by working a part time job, maybe it is time to talk to a bankruptcy attorney.

Hi chic1968 and welcome to our formum. We were in the same position earlier this year. We had entered into a dmp and we could only keep up for about 2 months. Your correct, the payments in DMP are not really much lower than what you were paying before. I found the only benefit was most creditors lowered the interest rate. We have explored Chapter 13 bk, debt settlement company and do-it-yourself debt settlement. We are on the fence about what direction to go. We have ruled out using a settlement company, we are still looking at chtp 13 or the settlement on our own. I don't really want to file the BK, we've been told we would be in for 5 years!! If I can pull off settlements I can be done in about 2 or 2 1/2 years. You are going to really weigh the pros and cons to all your options and pick what best fits your situation.

How much debt do you have? I'm assuming its mostly credit cards?

Read through all the posts here on the board about DMP, settlement and BK, that should at least help you get started.

Good Luck Reny

It seems to me that it would be in the credit card company's interest to modify my dmp, rather than having me default. Is there any way to negotiate with the credit card companies myself on this?

It would be in their best interest, however, often times they don't work that way. You can certainly contact them and discuss options. With the economy the way it is, many may be willing to"deal" its worth a try.

I have 35,000 - all credit cards. I just found this sight and there is so much great information in these forums. I will read through and I'm sure I can find some help here. Settling on my own seems like a great idea, I'm just scared to stop making payments. I was never late before I entered the dmp and the thought of collection calls constantly is not a happy one.

I know how you feel. I hate the collection calls too! I second biggest fear is being sued before I can settle, but I've told myself there's not a whole lot I can do about that and I have to keep the faith that it will all work out!

My credit card companies were willing to lower my interest rates to as low as 1.5%, 2%, and 5% respectively and put me in their own relief programs. However, I talked to them and a couple of dmp companies at the same time. The credit card companies offered a much better deal. I don't know if you can now go back to yours and try the same thing. Also, I had to close my accounts (which you probably had to do anyway with your DMP). It is at least worth a try to now go back to your credit card companies and see if you can do better yourself. I have been also looking into this site's info on debt reduction (find a good, reputable company that will offer you the step down from consolidation, to reduction, to bankruptucy if you continue to have trouble making payments), and also saw something about some states offering debt consolidation loans.
Most of all, I offer you my whole-hearted comfort! Remember this, you are doing your best, and even though I try to be a very honest person, and pay my debts, sometimes things go against us. The credit card companies have been, in my estimation, been taking rather unfair advantage for years. If they can't bend some now, then I don't feel I have to feel to bad if they don't get every little bit of interest (blood?!) from me that they may feel that they are entitled to! Because in the long run, they have earned plenty of money from me over the years! Good luck, and no matter what, keep on smiling!

I am currently 4 mos into my DMP and while my interest is lower, not 18-31%, the minimum payment only saves me about $150 per month on my $36000 worth of cc debt. I was informed by my DMP company that after 12 months of payments they would be able to renegotiate my interest. How true is this? If it is not true I will be pissed to say the least.

Yes they reduce the interest, but that's it. My payments only went down $160 per month. I can't afford that. Why don't they have the DMP structured to give you paments you can afford? not just based on your balances. Do they really want to be repaid? I f I did not have a security clearance to lose by defaulting I would not pay the cc companies a dime. I think the companies know repayment and not having any further negative information with our credit is important to us and they are still taking advantage of us while we seek to make things right. So much for feeling good about doing the right thing. I don't want to lose my job, especially in these times, but if I did I know who would not get a dime from me. This truly sucks and I'm only 5 months in. This is where we need government interaction!!!!!!

I jsut applied with a debt management program and they denied me because they said I need to atleast pay the minimum payments and I cannot afford the minumums! Hence the whole reason I was applying for debt management! They said all they do is eliminate interest or lower it. All those types of campanies are a joke to me. IF they want you to pay your minimums, you can surely do that on your own.

katie_meehan, this is my experience with a debt management plan via CCCS in Richmond - I started the four-year plan (they said 4 years, but the creditors' agreement letters stated 5 years?!?!) in Feb 2009. They were able to lower my interest rates from upper 20s on all cards to 18.9%, 9.9%, and I think 7.9% was the lowest.

I was pretty shocked that they couldn't get them down to below 5%, and maybe 0% temporarily while I got my finances in order.

I paid for four months, until last month (May). I was fed up. My counselor wasn't returning my calls or emails. My accounts were still being listed as 'past due' and the banks were still calling me!

When I missed that May 6th payment to the creditors, the banks called me even more. Well, it's late June and guess what I did yesterday? I called all of them back. I'm a putz and easily intimidated and shy so I was very nervous about calling them myself. I'm not good at negotiating.

I called Citi first. Have an 18k balance and they had lowered it to 9.9%, which meant I was paying $150 / month in interest and it wouldn't be paid off for almost five years! Ugh. The lady said, We can get you back into a self-administered DMP program and continue the 9.9% interest. I said, Look, I want to get rid of this - I'm broke (told her my lost job / new job at less salary true story) - can't you give me a better rate and let me pay this off more quickly? Well, she wasn't happy about it, but she put me on hold and came back with this offer - 0% interest for 40 months. I took it.

Next call was to Bank of America. 2 cards, the first card had 18.9% and the second had 7.9%. The counselor couldn't negotiate the rates. She said that 'due to regulations', they can't lower the rates anymore. I said, Well, I don't know what I'm going to do - I guess it's time to go back to the bankruptcy attorney.

She put me on hold and came back with this offer - a settlement for both cards at 20% of the total, payable in four installments. The catch is that the settlement must be completed within 90 days.

It will kick my you-know-what, but if I eat ramen and sit in the dark, I should be able to make those payments. And that debt (which is half of my total) will be gone in late September.

I'm going to skip payments to my other creditors to pay the B of A settlement. I know, I know - not good - but it's what I have to do to get half of my massive debt settled. And my credit is already trashed. Once B of A is gone, then I can call the other creditors and start negotiating with them. I can deal with collection calls for three months.

I had talked with a bankruptcy attorney (you can get free consultations with most) about filing for Chapter 13. He thought I should do it. But I don't want to, for a variety of reasons. People will tell you that you must pay taxes on debt settlement. Well, yes and no - it's a complex thing, and depends upon your assets and liabilities. If your liabilities are more than your assets, then no, you don't pay tax on settled debt.

And I suspect that - for most of us on this forum - our liabilities outnumber our assets.

Chapter 13 is very invasive and - surprisingly - more traumatic than Chapter 7. I've accompanied friends to both types of hearings and I was surprised at the differences. I guess because 13 is essentially creating a court-ordered DMP, you're in the courthouse a LOT more, dealing with the trustee all the time, and so on.

I'm just mentioning the bankruptcy stuff because you might be headed there (if you can't make minimum payments), or thinking about it.

After settling with B of A and Citi, I feel like such a weight has been lifted off of me. It's amazing. I don't mind struggling to make those payments if I know there is light at the end of my very long debt tunnel.

What you need to do is what I did - stop paying and let them call you for a while and then call them. If you can't pay, then you can't pay. If they were willing to negotiate with me (the worst negotiator in the world), then trust me - you shouldn't have any trouble.

DMPs are a waste of time and money. They do absolutely nothing. In fact, I am proof that you can do a better job yourself in a mere five minutes.

With the economy in shambles, banks are only getting 5 cents on the dollar for discharged debt. So any settlement will be better than charging off your account into collections, or watching you go into bankruptcy and they get nothing.

That's my long reply. :-) Good luck!

Oh, and yes, not paying will trash your credit. That's the price we pay for getting the lower rates and settlements.

I have a DMP with CCCS Baltimore Maryland and am happy with their services so far. I've been in the plan since January 2009 and am paying $300 less than what I was paying prior to agreeing on the plan. I had over $30,000 in credit card debt and my minimum balance to pay all of the cards exceeded $1000 per month and there was no "pay off date" in site. Under this plan, I will pay all of the balances off in 5 years. They lowered two of my cards (Chase and Citi) to 0% and knocked my BofA card down to 8% (It was at 20% before the plan kicked in and that's with "negotiating" with them!)
After 12 months, I do have the option to contact CCCS again and have them renegotiate my plan since by then my debt will be knocked down by about $9,000.
On the other hand... if my employment situation changed and I could no longer afford the plan, I'd have no other choice but to research a Debt negotiation plan or filing bankruptcy.