What is a debt management plan?

A debt management plan is specifically designed to help individuals reduce or eliminate their debt in an organized and systematic way. These plans typically involve working with a credit counseling agency to create a tailored strategy to pay off debts over a specified period. This often includes negotiating lower interest rates or reduced payments with creditors, consolidating multiple debts into one manageable payment, and establishing a budget to help avoid future debt issues. The primary goal is to empower individuals to regain control of their finances, making it possible for them to pay off debts effectively.

In contrast, increasing credit card limits, avoiding spending, or collecting more debts do not address the core issue of managing existing debt. These approaches could potentially exacerbate financial problems rather than resolve them. By focusing on a structured plan that prioritizes debt repayment, individuals can achieve long-term financial stability.