If you’re falling behind on bill payments, paying your credit card bills every month but your balances aren’t budging, or if you’re charging more on those cards just to stay afloat each month, it could be time to consider professional help, like a debt management plan.

Also known as a DMP, a debt management plan is a debt-relief option offered through a debt counseling agency or debt management company. These companies typically are members of organizations such as the National Foundation for Credit Counseling and the Association of Independent Consumer Credit Counseling Agencies. They work with your creditors to come up with a monthly payment solution that works for your situation.

The NFCC, for example, is an American nonprofit organization that provides counseling services for consumers. Established in 1951, the NFCC consists of a network of 106 agencies and 850 offices in the United States.

When you enroll in a debt management plan through a company affiliated with an organization like the NFCC, you make a monthly payment to the counseling agency, and it pays your participating creditors on your behalf. You pay a small monthly fee to the credit counseling agency for their help. (This fee may be waived if you can’t afford it.)

Is a Debt Management Plan Right for Me?

Like all debt-relief methods, a debt management plan might not be your best option, so it’s important to fully understand debt management in order to decide on the right solution for you.

Debt management is usually a good option for people overwhelmed by unsecured debt like credit cards, medical bills and other kinds of debts that don’t involve collateral.

So, for example, if you’re struggling to pay your mortgage or car loan, a debt management plan probably isn’t going to be your best option. Likewise, student loan debt is typically not eligible for debt management plans except in rare cases.

But, if you have multiple credit cards with balances, a DMP can simplify things because you have just one payment to make each month to pay all your participating credit card issuers, and often that payment will be made automatically from your bank account.

A credit counselor also may be able to negotiate lower interest rates with your creditors and get late payment fees and other fees waived, which will help to lower your monthly payment amount. Because of the lower interest rate, more of your monthly payment will be applied to your outstanding balance, and this will help to speed along your repayment. For example, one agency reported that clients reduced their monthly interest payments by an average of $209.81, and their total monthly payments went down an average of $172.48 each month. (Cambridge Credit Counseling Transparency Report #8).

Are There Drawbacks to a DMP?

Debt management plans typically last three to five years, and when you enroll in a debt management plan, participating creditors will close or suspend your lines of credit. So make sure you are ready to live credit card-free for a while. (You may be able to keep one card open if you need it for travel or business purposes, for example.)

Once you complete your plan as agreed, some of your creditors may re-establish your credit based on your new, debt-free status and the on-time payment history that you established through the course of the debt management plan. If not, you can rebuild your credit the traditional way, with a secured credit card, which requires a deposit.

To find out what kind of debt solutions are right for you, it’s a good idea to seek out a reputable credit counselor who can walk you through them.

How Does a Debt Management Plan Affect Your Credit?

While paying down debt in a responsible and timely manner is ultimately good for your financial life and your credit, participating in a debt management plan may have a somewhat negative impact on your credit during the course of the program. It seems counter-intuitive — after all, you’re getting a handle on your debt, shouldn’t you be rewarded?

The negative impact is due to the fact that you must close your accounts while in the program, and this can affect your debt-usage ratio. This factor accounts for about 15% of your credit scores. (On the flip side, paying down your debts will improve your overall debt levels. Some consumers see their scores improve during and after one of these programs.)

You should also consider that a potential landlord or employer who pulls your credit report will be able to see that you are enrolled in a debt management plan. Be prepared to explain why you are doing that and how it will help your overall financial health.

Because of these factors, debt management plans make the most sense for people who are struggling with high-interest debt, especially those who are making little-to-no headway paying down debt on their own, or who are worried about falling behind on their payments.

If you successfully complete a DMP, however, your balances will be paid off and you will be able to start putting the money you were paying on them toward other financial goals.