What is a Debt Management Plan?

By Upstart Content Team | Updated January 30, 2026
reading time 3 min read

A debt management plan is for anyone who wants to pay off their debt with the help from an organization that specializes in helping people get out of debt, such as a nonprofit credit counseling agency. 

These organizations help you figure out the best way for you to lump your debt from high-interest credit cards, for example. They help you come up with a framework to get rid of the debt in the next few years. The goal will likely be to have your debt fully repaid in the next three to five years. 

Because you’re essentially having the debt management organization pay off your original debt, having this plan doesn’t negatively impact your credit score than if you were to file for bankruptcy. 

Who is debt management for?

Debt management plans provide you with the resources and tools you need to get you going on the path to a better financial life. It’s for anyone who has struggled to pay off debt in the past and wants help from a professional. 

A debt management counselor will assess your situation and help advise you on which option is best for you. 

For example, if you mostly have unsecured debt that you know you can reasonably pay off in the next year or so, you could choose a debt consolidation loan or balance transfer credit card instead. 

The counselor will help you better understand how to better save to reach your goals. By teaming up with a debt management resource, you get the support to pay off debts, which prevents you from defaulting or having to declare bankruptcy. 

How a debt management plan works

The credit counseling agency may go over your unsecured debts that you owe, such as credit cards and personal loans. Secured debts, including a mortgage, auto loan, or student loans are not covered. 

Through your authorization, the counselor does the negotiating of the debts you owe by reaching out to the creditor and requesting a lower monthly payment or interest rates, for example. They also make themselves the payer on your accounts and make monthly payments to your creditors. 

Once you start the debt management plan, you make a monthly payment to the credit counseling agency, who is responsible for distributing that money to your various creditors on your behalf. 

During this time of repayment, you may be asked to close your credit cards or refrain from using them. Many credit issuers require that you close your account if you decide to go into a debt management plan. You will also be asked to avoid opening any new credit cards at this time, since the whole point of going into a debt management plan is to pay off your debts as quickly as possible. The most important part of being in a debt management plan is to consistently make your payments on time. 

You may need to pay some fees related to signing up and a monthly fee, but if you’re getting your interest rates or other fees lowered or eliminated, it could more than cover the cost you’d pay to the agency.  

These rates vary depending on where you live. 

Benefits of a debt management plan

Sometimes, the hardest part is getting started. If you are overwhelmed or can’t seem to make a dent in your debt, this route may be a good option for you. 

The benefits of having a debt management plan may include: 

  • Professional advice: Getting the support of a counselor who will negotiate on your behalf and potentially lower your interest rate and other fees.
  • Tangible steps to pay off debt: They help you come up with a plan and execute for you.
  • Improve your financial life: Gaining a better understanding of your finances including spending and saving so you won’t find yourself in this situation again.

Disadvantagesof a debt management plan

There are disadvantages of a debt management plan, including the fact that the plan only covers unsecured debt, so you won’t qualify if you have debt from a house or car. 

  • Fees: Paying a setup and monthly fee to the agency for their services.
  • Less access to credit: During the timeframe in which you repay your debts, you won’t have as much access to credit.
  • Potential dip in your credit score: You may need to close your credit card(s) that you include in the debt management plan. This may cause your credit score to dip temporarily.

Where to look for a debt management plan

If you’re ready to sign up for a debt management plan, be sure to look for one that is accredited by the National Foundation for Credit Counseling. 

Compare different agencies and find one that suits your lifestyle and ability to repay your debts. Be prepared with questions and most likely, a credit counselor will go over your financial options. 

*This content is general in nature and provided for informational purposes only. This content is not specific to Upstart, except where explicitly stated. This content may contain references to products and services offered through Upstart’s credit marketplace. Upstart is not a financial advisor and does not offer financial planning services.

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About the Author

Upstart Content Team

The Upstart Content Team develops educational content grounded in research and real-world financial experiences. By breaking down complex topics into clear, actionable insights, the team helps readers navigate important decisions—so they can feel confident in the money moments that matter.

More resources you may be interested in

Debt Consolidation Loans: What It Is and How It Works
Debt-to-Income Ratio (DTI): What It Is and How to Improve It
Paying Off Debt vs. Saving: 3 Things to Consider

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