How To Cancel A Debt Management Plan
When you first contact a debt management company (DMC) about paying off your credit cards, they will often offer a payment plan or a debt review. A debt review is when the DMC will go through all of your accounts with a fine-toothed comb to see if there are any missing money or incorrect information.
A debt review can also include asking you to provide proof that your income has decreased so that we may update our estimates accordingly. This is called contingency planning for bankruptcy.
If the DMC determines that you cannot pay off your debts within the time frame given, then they will attempt to work with you by finding you a more affordable repayment option. It is very important to try hard to keep this from happening because it is much easier to stay in debt than to manage a budget!
By staying in debt longer, you have subconsciously convinced yourself that you need to continue spending because you don’t know what else to do. It is difficult to break this cycle but needs to be done quickly to avoid bankruptcy.
Call the debt collector and inform them that you want to cancel the debt
Before calling, it is very important to be clear about what your plan is. You will need to make sure they understand that you are officially canceling the debt management program. This means that they do not have permission to continue trying to collect this money through other collection methods.
If you think that you can handle these debts yourself, then there is no need to call out for professional help. Simply start paying off the creditors directly!
By officially dropping their contract, you send them an explicit message saying that you are done working with them and hope that they will stop contacting you about unpaid bills.
Provide them with proof of payment
Once you have determined that they do not qualify for debt management, you will need to prove that they no longer meet the requirements to be part of their program. If possible, provide them with proof of payment or evidence that you received notification that they were terminated from the service.
If it is too late for this, then at least make sure that they do not list you as an additional creditor on their credit report. This can still hurt your credit so try to work out a solution first.
You may also want to consider suing them in court if they violated the terms of their contract with you.
They may ask you to pay more than the original debt
Unfortunately, there are sometimes problems when creditors negotiate with your credit card company about repayment. These can include taking additional money out of your bank account to make up for the payments or asking for a higher interest rate that is not in your best interests.
In these cases, a third party comes into play – a professional consultant who helps resolve your debt issues. A good debt management plan (DMP) provider will work hard to get you the best deal possible.
But unfortunately, not all professionals are equal. Some will try to take you down a path of high cost services that do not benefit you at all!
There’s no telling which ones are going to hurt you, but we wanted to give you some tips on how to recognize and avoid them.
Stay calm and collect more proof of payment
Sometimes, even after you have contacted your creditors repeatedly and offered all necessary proofs of payment, they will not believe that you can afford their services. This is totally understandable as creditors are trying to earn money by extending credit to you!
Banks will sometimes ask for additional documents or information beyond what was originally asked for in order to verify debt payments. It is very common for them to do this when borrowers fail to prove adequate income or spend too much money on entertainment expenses or unnecessary daily purchases.
It is also possible that a creditor may want to compare your monthly balance with what it was before you enrolled into a debt management program. This could be done through repeated phone calls or visits to ensure you cannot pay off your existing loans.
By having these conversations, you will show how dedicated you are to paying back the debts and help yourself get out of bankruptcy faster.
Confirm with the debt collector that the debt has been canceled
It is important to confirm from your own knowledge or through talking to others that you have actually successfully cancelled the DMP. Sometimes, even though you paid off the loan in full, an additional fee is still charged for “services” they provide.
This can include fees for staying in the program longer than expected, continued communication via phone calls and messages, etc. These extra costs are not typically part of the initial agreement so it is best to make sure these things do not occur by confirming there were no ongoing services needed.
Stay calm, even if the debt collector is rude
Sometimes, after you've done all that you can do to pay off your debts, additional steps are needed. These include trying to work out a repayment plan or a payment solution with your creditors.
A third party credit counseling agency may be able to help you find such a solution by negotiating lower monthly payments on your loans or offering other alternatives like writing off some of the debt.
But before they can help you, they need to verify that you have made an effort to try working things out between yourself and your lenders.
If you feel threatened or pressured into taking action that could hurt you further, tell the company officials or staff members around you that you want to speak with them but you want to first talk to their legal department about possible lawsuits.
Do not pay the debt
Another option is to simply refuse to make any payments towards your debts. This is called paying no money towards your creditors’ loans. You can also choose to stop making monthly payment arrangements, like putting a certain amount into a savings account each month that you dedicate to your debt repayment plan.
This will put pressure on your creditors to work with you in getting rid of this bad loan!
It is important to remember that even if you do manage to cancel your credit card accounts, this does not mean you are out of the woods. Many times, banks will continue to pursue collection actions against you for the unpaid balance.
Some examples of these action include lawsuits, garnishment of income, etc. Therefore, it is very important to think about how to eliminate all debt before cancelling your credit cards.
Another way to prevent lenders from charging fees while attempting to collect past due balances is by establishing credit. Having credit makes it easier to finance daily living expenses such as groceries, rent, and bills.
How to Eliminate Credit Card Debt
And once again, staying motivated is one of the most difficult things to do. It is easy to get distracted or feel overwhelmed when spending too much time trying to repay your debt.
A good first step is to determine what kind of payoff strategies make the most sense for you. For example, people who spend their life in high-paying jobs may focus more on investing rather than reducing their debt quickly.
Contact your local consumer protection agency
Even though you have entered into a debt management plan, do not give up! There are ways to tell if your debt has been put onto another company’s list. You can call or visit your state’s department of financial services in order to find out whether yours is a reputable organization.
Most states have at least one division within their department that deals with credit issues. These divisions include things such as fair lending, civil rights, and bankruptcy. Their job is to make sure that people being charged unfair fees or penalties for loans are protected by law.
These divisions also investigate complaints about large creditors who may be doing something illegal. They look into whether there were warnings given before collection actions were taken, and they check to see if charges exceed legal limits.
If you think your DMP is fraudulent, contact this office immediately. Tell them what company you believe sent you the notification and what action they asked you to take. Most agencies will work with you to stop the fraud and help you get back control of your finances.