Chapter 2
Chapter 3
Chapter 4
Chapter 5
Next Step
Exit Course

Chapter 2: Debt Repayment Options

Debt Management Plan

A Debt Management Plan (DMP) can be an ideal way to pay unsecured debts. These plans require participants to suspend the use of their credit lines and make one monthly payment to BALANCE, which in turn pays the creditors.

DMPs are beneficial because:

  • Many creditors reduce or eliminate interest rates and penalty fees so the maximum amount of money goes toward the principal.
  • Payments remain consistent – as each debt is paid off, the remaining creditors are paid more, speeding the payoff process.
  • The single monthly payment makes money management easy.
  • DMPs usually will stop collection calls and activity.

Many people express concern about the impact of the DMP on their credit score. The DMP does not negatively impact a credit score. It's not one of the factors used in computing a credit score. Consistent payments over time, through a Debt Management Plan, may in fact improve your credit score.

To establish a DMP, make an appointment to meet with a credit counselor. The counselor will conduct a thorough financial analysis. After examining your assets, income, spending habits, and debt, your counselor will discuss your options and provide an action plan of the steps you need to take to achieve your goals. To meet with a counselor, give us a call at 800-777-7526. Or, complete the on-line worksheet in the Next Step section of this program. A counselor will follow up with you to examine all of your options.


Hardship plans

If you know you won't be able to meet your financial obligations, contact your creditors immediately. You may be eligible for a hardship program that will keep your account(s) in good standing. If you cannot make a full (or even partial) payment now, but an end is in sight, you may be able to set up a plan where payments, interest, and fees are reduced or suspended for a specific amount of time. Though it can be very tempting to offer more than you can realistically afford, and in a time frame you probably can't meet, don't do it. If you can’t make the payments you agree on, you may not get another chance for a break.

To arrange a hardship plan:

  • Complete a personal budget so you know what you can afford to pay ( for guidance on completing a budget, go to Chapter 3- Money Management)
  • Arrange the hardship plan by mail
  • Write a short explanation of your situation (Click here to view sample hardship letter)
  • Make your offer specific
    • How much (if any) you can send
    • The proposed date the hardship plan will end
    • Any other considerations you are requesting (suspension of interest and fees, etc.)
  • Include supporting documentation
  • Send a “good faith” payment, if possible
  • Send all correspondence via certified mail, return receipt requested
  • Keep copies of all correspondence and documentation


For older debts, you may be able to arrange a settlement: an agreement where you would pay off the debt for less than what you actually owe. If the debt is old, the creditor may accept very little to consider it paid. You probably won’t get such a deal with younger debts, but offer what you can, and if it is reasonable they may accept it.

To arrange a settlement:

  • Make your offer and be prepared to negotiate
  • Communicate with the highest-ranking employee possible
  • Confirm the settlement in writing
  • Never send a post-dated check
  • Send all correspondence via certified mail, return receipt requested
  • Keep copies of all correspondence and documentation


Give property back

If you have secured debts, such as a vehicle or a home, or some financed jewelry or appliances, you do have the option giving the property back. This may result in a deficiency balance – the difference between the value of the item and the balance of the loan – that would remain your responsibility to pay.

Copyright © 2007 CCCS of San Francisco