EagleTribune.com, North Andover, MA


March 24, 2013

Debt management plan requires credit card

I’ve been on a debt management plan, or DMP, for more than three years. I’m now thinking of getting a low-limit credit card because I’ll be interviewing for jobs and would like an additional source of funds in case of car issues, etc. So here’s my question: What happens if I apply for a new card now? I’d need a credit limit of no more than $1,000 for emergencies. Will I be rejected? If not, and I obtain a card and use it, will my debt plan change? At this point, will anyone care on the plan’s end? I am hesitant to consider this, but at my age, I feel ridiculous asking my father to use his credit card.

For my readers who don’t know what a debt management plan is, let me take a minute and explain.

Creditors recognize some people can’t make payments due to circumstances beyond their control. When a person has multiple creditors, getting all of them to agree to take less can be next to impossible.

Therefore, many creditors allow nonprofit credit counseling services to offer a structured repayment plan with lower payments and interest rates that a person can afford as part of the counseling and budgeting process.

You are smart to ask this question before you apply for a new credit card. Taking on additional debt could mean it is less likely you would be able to successfully complete the plan. Also, a creditor will not want to accept lower payments if you are paying a new creditor higher payments. However, most debt management plans recognize you may need an active credit card, especially for business-related, reimbursable expenses.

To avoid any problems with your current creditors, I recommend that you contact your credit counselor and let him or her know that you need to use a credit card for business. Getting one just in case of emergencies won’t fly. That’s what savings are for.

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