Definition
A structured payoff program arranged by a nonprofit credit counseling agency: you make one monthly payment to the agency, which pays your unsecured creditors, who often agree to reduced interest rates and waived fees. Plans typically run three to five years, and enrolled cards are closed.
Why it matters
A DMP can cut card interest dramatically without the credit devastation of settlement or bankruptcy, but it demands consistency: missed payments can void the concessions. It covers unsecured debt only.
Example
Someone with $15,000 across three cards near 24% APR enrolls in a DMP. Creditors accept about 9%, the single payment is $350 a month, and the debt clears in a little over four years instead of decades of minimum payments.
Put it into practice
Related terms
This definition is educational, not financial, legal, or tax advice. U.S. rules and limits change; verify time-sensitive details with official sources. See our disclaimer.