Debt Management Plan (DMP)
Definition - What does Debt Management Plan (DMP) mean?
A debt management plan is a specific, customized strategy that people use to pay off their debts. Debt management plans are often created by credit counselors.
In the context of the law, many people attempt to use debt management plans to prevent them from facing bankruptcy. A host of legal consequences can occur if a party files for bankruptcy.
Justipedia explains Debt Management Plan (DMP)
Debt management plans typically involve a person depositing a specific amount of money each month to a credit counseling organization. The credit counseling organization then uses that money to pay off the person's debts in the most efficient way possible.
Factors such as loan amounts and interest rates can impact how they are prioritized in debt management plans.
Most loans are legally binding, and so must be paid off. However, if a person fails to pay off debts even with a debt management plan, then filing for bankruptcy may be the only option left.