Debt-management plan (DMP) is a term used in credit counseling to describe an agreement concluded between a debtor, a credit counseling firm and the debtor’s creditors. Under the DMP, the debtor makes a payment to the counseling firm, which after oversees the distribution of the amount among creditors.
Credit counseling agencies will negotiate in the name of the debtor with the creditors in order to lower payments and interest rates on a monthly basis in order to allow the debtor to re-take control of their finances in order to repay their debt. The aim of the DMP is to allow debtors who have difficulties to make payments on time to pay a smaller amount per month, in order to be able to pay their creditors.
DMPs are regulated by the U.S. Federal Trade Commission and different states have the power to regulate DMPs individually in order to protect state citizens from fraud.
[Last updated in April of 2022 by the Wex Definitions Team]