Debt Management Plans

If you are a Miami resident juggling credit card balances, medical bills, and personal loans, you have almost certainly seen advertisements promising to cut your payments in half through a "debt management plan." Some of those programs are legitimate. Others violate Florida law from the first phone call. Before you sign anything or send a single payment to a debt management company, you should understand exactly how these plans work, what fees Florida statutes actually permit, and how a debt management plan (DMP) compares to alternatives such as Chapter 7 or Chapter 13 bankruptcy.

What Is a Debt Management Plan?

A debt management plan is a structured repayment arrangement, typically administered by a credit counseling agency, in which you make one consolidated monthly payment to the agency. The agency then distributes that payment to your unsecured creditors, usually credit card issuers, medical providers, and personal loan lenders. In exchange for your participation, creditors often agree to:

• Reduce interest rates, sometimes from 25%+ down to single digits
• Waive late fees and over-limit charges
• Re-age the account so it reports as current
• Stop collection calls while you remain in the plan

A typical DMP runs 36 to 60 months. Critically, a DMP is not debt settlement and it is not bankruptcy. You repay 100% of the principal you owe, the savings come from reduced interest and fees, not from forgiveness of the debt itself.

Florida Law Strictly Regulates Debt Management Companies

Miami consumers are protected by Florida's Credit Counseling Services statute, Fla. Stat. §§ 817.801–817.806, which governs any person or agency providing debt management or credit counseling services in the state. The key provisions every Miami consumer should know:

Fee Caps Under Fla. Stat. § 817.802

Under § 817.802(1), it is unlawful for a debt management provider to charge:

• More than $50 for the initial setup or initial consultation; and
• Ongoing fees exceeding $120 per year for additional consultations, or (if the provider is performing actual debt management services) 7.5% of the amount you pay monthly through the plan, whichever is greater.

Worked example: Suppose you owe $30,000 in credit card debt and enroll in a 60-month DMP paying $600 per month. The maximum lawful monthly service fee is 7.5% of $600 = $45 per month, plus a one-time setup fee of no more than $50. If a company quotes you a $400 "enrollment fee" or a $150 monthly administration charge, that fee structure violates Florida law. Under Fla. Stat. § 817.806, a violation of the statute is a third-degree felony, and consumers may have civil remedies as well.

The 30-Day Disbursement Rule

Fla. Stat. § 817.805 requires the provider to disburse to your creditors, within 30 days of receipt, all funds you paid in (less authorized fees). This matters enormously in practice: unscrupulous operators sometimes hold consumer payments for months, causing accounts to fall further behind while the consumer believes creditors are being paid. If your statements show payments you made in January that did not reach the creditor until April, the provider has broken the law, and your legal position against both the provider and the creditor changes significantly.

Collection Protections Still Apply

Enrolling in a DMP does not strip you of your rights under the Florida Consumer Collection Practices Act, Fla. Stat. § 559.72, which prohibits harassment, threats, communication at unreasonable hours, and misrepresentation of the amount or legal status of a debt. And before you agree to repay any old account through a DMP, confirm the debt is even enforceable: Florida's statute of limitations under Fla. Stat. § 95.11 generally bars suit on written contracts after five years and on open accounts after four. Making a payment on a time-barred debt can, in some circumstances, revive it. Our page on Miami debt collection statute of limitations defense explains how we evaluate whether a debt is legally collectible before you commit a dollar to it.

When a DMP Makes Sense: and When It Doesn't

A debt management plan is often the right tool for a Miami household that:

• Has steady income sufficient to repay the full principal within five years
• Owes primarily unsecured consumer debt (credit cards, medical bills)
• Wants to avoid a bankruptcy filing on the public record
• Has debts that are clearly valid and within the limitations period

A DMP is usually the wrong tool when:

• You cannot realistically fund the plan. DMPs have high dropout rates, and creditors typically revoke all concessions the moment you miss payments, leaving you worse off.
• You are behind on your mortgage. DMPs address unsecured debt only. If you are facing foreclosure on a Miami-Dade home, a Chapter 13 plan that cures mortgage arrears over three to five years offers court-enforced protection a DMP simply cannot.
• A lawsuit or garnishment is imminent. A DMP creates no automatic stay. Only a bankruptcy filing triggers the stay under 11 U.S.C. § 362, which immediately halts lawsuits, garnishments, and repossessions.
• The math favors discharge. If your income is modest and your debts are large, you may meet the Chapter 7 qualification requirements and eliminate the debt entirely in four to six months rather than repaying it over five years.

DMP vs. Bankruptcy: A Side-by-Side Comparison

Credit Counseling and the Bankruptcy Connection

There is one place where credit counseling agencies and bankruptcy law formally intersect. Under 11 U.S.C. § 109(h), no one may file a bankruptcy petition without completing a credit counseling briefing from an agency approved under 11 U.S.C. § 111 within the 180 days before filing. That briefing must include an analysis of whether a debt management plan could resolve your situation without bankruptcy, and if the agency prepares a proposed DMP, a copy must be filed with your petition. A second course, in personal financial management, is required after filing before you can receive a discharge; our page on the Miami financial management course requirement walks through that step in detail.

This means the DMP question gets asked in every bankruptcy case anyway. The difference is who is analyzing it: a counselor working through a script in a 60-minute session, or an attorney who has reviewed your income, your Miami-Dade homestead, your creditor lawsuits, and the limitations status of every account.

How Our Firm Evaluates a DMP for Miami Clients

When you meet with us, we do not start with a product; we start with the numbers. Concretely, we will:

1. Audit every debt for enforceability, limitations defenses under Fla. Stat. § 95.11, and FCCPA violations that may create counterclaims.
2. Run the repayment math: comparing total cost and monthly burden of a lawful DMP against Chapter 7 and Chapter 13 outcomes.
3. Vet any provider you are considering against the fee caps of § 817.802 and the disbursement rule of § 817.805.
4. Protect your assets by confirming your homestead, wages, and accounts are shielded regardless of which path you choose.

You can contact the Law Offices of Albert Goodwin by phone at 786-522-1411 or by email at [email protected].