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It is important, however, whether you are enrolled in a Debt Management Plan (DMP), or considering doing so, that you understand how it works.
What is a Debt Management Plan?
A Debt Management Plan (DMP) is an approach to debt repayment in which we work with you to consolidate all of your unsecured debts into a single monthly payment, with the goal of receiving better repayment terms from most creditors. After about three consecutive DMP payments, most creditors will accept our proposals and, in many cases, agree to significantly reduce your interest charges, eliminate late and over-the-limit fees, and reduce the amount of your monthly payments.
When you initially enroll, we look at your balances, creditors, expenses, and income to ensure that our DMP is the best solution for your specific needs. If so, we calculate a monthly payment that will allow you to work your way out of debt in approximately five years. While this monthly payment remains consistent throughout your plan, as each balance is paid off, the payment you were making to that creditor is reapplied to a remaining creditor until your last balance is satisfied. This payment methodology, in conjunction with the lower interest rates and other benefits that most creditors extend while you are enrolled in the plan, is what allows you to pay off your debts in such a short period of time.
A proposal is an implied contract with a creditor, where you, the customer, agree to pay a certain amount each month until the entire debt is satisfied. In turn, the creditor usually provides benefits such as a lower interest rate, which help to satisfy the debt sooner.
A proposal is automatically sent to your creditor(s) five days prior to your first CareOne DMP payment.
The creditor will review the proposal, account balance, and account history, and will then either accept the proposal, decline the proposal, or not respond at all. It usually takes a few days from the time the creditor receives the proposal and initial payment before we receive a response.
There are three ways to check the status of your proposals:
Consistent and timely payments are essential to ensuring that you receive and keep your creditor benefits. It generally takes three months of consistent DMP payments before a creditor is willing to extend benefits. Once you begin receiving benefits, your creditors expect to continue getting timely payments each month, in order to continue extending those benefits.
While every plan varies slightly, on average, we estimate that it will take 60 months to fully repay your plan debts, assuming that all payments are made consistently and on time.
While you do have the ability to change your payment due date on your plan, it can affect your creditor payments, which can impact your success. Before making any date changes, keep in mind that your creditors expect to receive a payment every 30 days. If you change your debit date, and select a date that falls outside of this range, a creditor may consider it a missed payment, which can jeopardize the favorable terms they have extended. This is why it is so critical that you select the right payment due date from the start, and consistently make your payments according to this date.
While missing a payment or making a late payment can obviously impact your success on the plan, making a payment too early can also do more harm than good. Creditors like consistency, and expect to receive a payment every 30 days. Since the majority of our customers participate in our automated EasyPay system, creditors are accustomed to receiving their payment on a 30-day cycle. However, if you make your monthly payment early, and it falls within the previous month's 30-day cycle, it may be treated as a missed payment for the month you are actually trying to make a payment on.
To avoid any confusion, we prefer that you make your payments on the same day each month using the EasyPay system, and if you find that you have additional money each month, increase your monthly payment amount accordingly.
Although it may jeopardize the benefits you receive from your creditors, we understand that there may be circumstances beyond your control requiring you to stop a payment. If, for whatever reason, you need to authorize a stop payment for a period of time on your account, please call our Customer Care department at 1-800-CARE123 as soon as possible so that we can work with you to properly stop and reinstate your plan payments.
While we try to estimate when your account will be fully paid off as accurately as possible, we need your help in monitoring your statements closely. Once a creditor notifies you that one of your accounts has been paid in full, please let us know, in order to avoid any unnecessary payments to that account and to ensure that your My CareOne status is kept current.
Through your customizable My CareOne page you can track your progress, review the status of a creditor proposal, and even make account adjustments. When you log in to My CareOne, you will find information and content that is relevant to the plan you are on, where you are on your financial journey, and what stage of life you are in.
We also have an extremely robust online community where you can connect with others facing similar financial situations by participating in our groups and forums, and reading our blogs. Some of our most successful customers are those that participate frequently in the community and take advantage of the many free resources our website has to offer. These resources are designed to help you learn to manage your money wisely in order to create a secure financial future.