DMPs can still harm your credit score

It seems logical that if you are making an effort to pay off your debts that this could only help your credit score, but this is not always the case.  While just signing up for a DMP in and of itself may not harm your credit score, your creditors will still make notes on your credit report that you are in debt management.  Also, most creditors will not agree to a DMP without closing your account, and each closed account shaves points off of your credit score.  You also will likely not be eligible for any new credit cards or loans during the course of a DMP.

Debt Management Services are there to make money.

Just because a Debt Management Service is a non-profit does not mean that they are free or cheaper than for-profit services.  Usually a percentage of your monthly payments go towards their fee.  If you are unable to keep making your payments and drop out of the DMP all of the money that went towards their fees did not go towards your debts, and you are in just as bad of a situation as when you started.

The most important thing to think about when you are considering a DMP is whether or not you can realistically sustain the amount and time commitment needed to successfully complete the plan, especially during this uncertain economy.  Bankruptcy protection is a valuable tool that allows many people who are drowning in debt to obtain an invaluable financial fresh start.  If you are one of these people, you should at least consider meeting with an experienced bankruptcy attorney for a low- or no-cost consultation.

Financial Freedom Law is an experienced, compassionate partner that can help you decide among many options, depending on income, assets, the nature of your debts, and the goals you may have after completion of a Chapter 7 or Chapter 13 bankruptcy.  Please contact our Sacramento office at 916-313-9069 or via email at info@california-bankruptcyattorney.com.