Debt Management - Can it Help You?
In North Carolina and in other states, many individuals and families are in need of debt relief from high-interest credit card debts and unsecured debts (like medical bills, gas charges, or even department store charges). If you are also struggling with credit card debts, there is help available in the form of debt consolidation, debt settlement, or even bankruptcy. Debt management - or debt consolidation, typically involves combining, or "consolidating," your debts into one, more structured, and more manageable payment made to a credit counseling agency.
On the other hand, debt settlement is a process where you are hoping to settle or negotiate with creditors for substantially less than what you owe. Both options have become popular alternatives to bankruptcy, which is also a form of debt relief, but one that can have a more damaging and longer lasting effect on personal credit.
Compare your debt relief options today. Request a Free debt relief analysis and savings estimate, at no obligation to you.
How Debt Management Works
As mentioned earlier, the goal of a debt management plan, or a DMP, is to combine or "consolidate" your unsecured debts into a SINGLE, MORE AFFORDABLE, and MORE STRUCTURED monthly payment made to a credit counseling agency that, in turn, will distribute those funds to creditors. When you enroll in a debt management plan, a credit counselor will assess your financial situation and debt amounts.
Afterwards, your credit counselor will typically develop a strategy and submit proposals, on your behalf, to creditors requesting lower interest rates and elimination of late fees or other penalties. Creditors who agree to the proposals are generally placed into the debt management program or plan.
With a more structured and more affordable repayment plan in place, you would typically pay your debts sooner than if you continued to make the monthly payments on your credit cards at higher interest rates. However, it's important to understand that while credit counseling agencies typically submit proposals to creditors and disburse those funds to creditors, it is still your responsibility to make sure that money is available in the account set up for your monthly payment.
Credit Card Debt Settlement
For many consumers, debt settlement is also a viable relief option to help them get off the debt treadmill. If you are considering debt settlement, it's important to understand that unlike debt management where you are typically paying off the entire amount of your credit card debts, with debt settlement, you are hoping to settle or negotiate with creditors for significantly less than what you owe.
Today, more than ever, credit card companies are typically willing to negotiate with consumers who are struggling with debts. In many cases, creditors that sell off what they may consider to be "bad debt" to third-party collectors may only receive 10 cents on the dollar. As a result, creditors will normally consider negotiating with consumers who are struggling with debts but who can manage to make a reasonable settlement offer.
But there are potential risks involved with debt settlement. As the term implies, debt settlement involves negotiation - credit card companies are certainly not legally required to settle with you. Debt settlement firms also typically advise or counsel consumers to stop making their credit card payments in order to accumulate funds over time that they can use to make a reasonable settlement offer.
In many cases, creditors may threaten to sue consumers who default on the terms of their credit card agreements. In addition, credit scores will typically decline for consumers who default on the terms of their credit card agreements.
In spite of the potential risks involved with debt settlement, it remains a popular debt relief alternative to bankruptcy - which, for many consumers, is typically the option of last resort and one that can have a more negative and longer lasting impact on one's personal credit. The bottom line is, if you are seeking debt relief, there is help available - whether it's in the form of a debt management plan or consolidation, or in debt settlement.
Start here to request a FREE debt relief analysis and savings estimate.