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Debt Repayment
Plans
If your financial difficulties arise from too much debt or an
inability to repay your debts, a credit counseling / debt consolidation agency may work out a Debt Repayment
Plan for you. In these plans, you deposit money each month with the credit counseling
/ debt consolidation agency. Your deposits are used to pay your creditors according to a payment schedule the
counselor develops with you.
As part of the repayment plan, you may have to agree not to apply for — or use
— any additional credit while you’re participating in the program. A successful
repayment plan requires you to make regular, timely payments, and could take 48 months or
longer to complete. Some credit counseling / debt consolidation agencies charge little or nothing for managing
the plan; others charge a monthly fee that could add up to a significant charge over time.
A debt repayment plan does not erase your credit history. Under the Fair Credit
Reporting Act, accurate information about your accounts can stay on your credit report for
up to seven years. A bankruptcy can stay on your report for ten years. In addition, your
creditors will continue to report information about accounts that are handled through a
debt repayment plan. For example, creditors may report that an account is in financial
counseling, that payments have been missed, or that there are write-offs or other
concessions. But a demonstrated pattern of timely payments should help you get credit in
the future.
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