Debt Relief Companies » Debt Management Plan

I have an elderly couple who are in debt, made by deadbeat children. Will one of these debt relief companies help them. They are on a fixed income.

Scott — Tue, 22 Jul 2008 14:34:09 +0000

It really depends on the situation, the fixed income level, and the amount of debt that has been accumulated. The question really is, how bad is the problem?

- Are they making their payments currently or have they fallen way behind?

- Could their fixed income cover the payments if the interest rates were reduced (if so, look into a debt management plan) or do they need to try and settle with their creditors to greatly reduce their debt load (with a debt settlement program)?

- Or are they only able to really apply their fixed income to essentials such as food, housing, and healthcare?

Using a professional debt relief service does cost money as the programs are not free, however, even with the fees included it can bring down the overall monthly credit card bill (sometimes dramatically). Fixed incomes are tough however because these types of situations leave little room for error and often the fixed income only covers daily expenses.

Talking to debt relief companies is free as they all offer initial consultations to assess your situation to see if you are a good candidate for their program. I suggest you take the time to speak with a few of them to get a good answer.

Best of luck to you and the people you are nice enough to be helping.

I have approx. 45-50k in unsecured debt- I have talked with a several agencies about a debt management vs debt settlement program-I would like to know how both programs will affect my credit report about 12-24 mos. later if all payments are timely-will my credit report reflect that I am in a c.c. program until the program is completed?which program will help you to raise your credit score faster once completed?

Scott — Thu, 10 Jul 2008 15:30:26 +0000

Your credit score will typically be damaged more severely with a debt settlement plan than with a debt management plan. During the debt settlement process you stop paying your credit card bills until a negotiated settlement is reached so your credit score obviously suffers and will take time, strict budgeting, and effort to repair. However, most of the time, a debt settlement plan is a quicker solution than debt management so it allows you to begin your credit score rebuilding process sooner.

Yes, with debt management your credit score will reflect the fact that you are in a management program but assuming the debt management company is diligent about paying your creditors on time every month, your credit score will not suffer as much.

So there is a tradeoff, how fast do you want to get out of debt (faster with settlement) vs. how concerned are you about your credit score (less damage with a debt management program)?

That’s the question you need to consider. I hope that’s helpful.

i owe about 15000 dollars to creditors..ans would like to lower my intrest on them or have one lower monthly payment. I am condisering higering a company to help settle my debt, but i can’t decide if that is the best choice because i am still making my payment within days of the due date. so i pay on timeish, but i am not making a dent paying of the actual money (just intrest), and i can’t afford to pay too much more..what would be the best route for me?

Scott — Mon, 10 Sep 2007 19:33:43 +0000

I would suggest you speak with a non-profit credit counseling agency to start and let them give you some ideas as to how to best deal with your situation. You are keeping on top of your debt which is great but you are correct in that you should figure out how to get ahead of the game and actually start to reduce your principle.

They can help you lower your interest rates and consolidate your payments to make them easier for you to manage in what’s called a “debt management plan”.

I just signed up with Campos Chartered Law firm for debt settlement. Are they reputable? because I wanted consolidation and they told me it was consolidation of debt only to find out now it’s settlement.

Scott — Tue, 17 Jul 2007 21:35:14 +0000

The use of the word “consolidation” of debt can be very confusing. Consolidation is lumping several debt payments into one but there are several primary ways to accomplish that:

1. Using home equity in your home to refinance and “consolidate” your debts (means you pay off credit cards and other bills by increasing your mortgage balance).

2. “Consolidate” your credit card (and similar bills) through a debt management plan which is usually a service offered by a credit counseling agency. They will help you better manage your bills and help lower your interest rates and late fees getting you out of debt typically in 5-7 years.

3. When you enter a debt settlement program you do “consolidate” your bills into one monthly payment which should be less than the payments you are currently making when you combine them. This is really a more aggressive startegy that will have you debt free in 18-36 months but has more risk to it.

So it’s really a question of what type of plan you originally wanted. Did you intend to enter into a:

1. Debt management plan OR
2. Debt settlement plan

Follow those 2 links to read more and then discuss with the company you signed up with who I have not yet heard of until now. Best of luck to you.

As we’ve been contemplating this move for a while and are now forced to do something thanks to a major repair to our commuter car, we’d previously contacted both Freedom and Takechargeamerica for information before I found your site. In fact, I was preparing to call them when I found your site. They seem reputable, and the press clips I found seemed okay. Is there a problem with these companies (this stuff is very confusing!).

Scott — Mon, 04 Jun 2007 18:13:38 +0000

Glad I can help you choose a debt solution. Freedom is a company I have never worked with but apparently is very large. I have never heard of TakeChargeAmerica before but according to their site, they are a non-profit credit counseling agency which means they will likely put you into a debt management plan whereas Freedom is a debt settlement company.

In general, a debt management plan will take 5-7 years to be debt free while a debt settlement plan will take 18-36 months (depending on your situation/income). Debt management plans are provided by non-profit companies who are often funded by credit card companies. They coordinate a payment plan with lower expenses, rates, etc.

Debt settlement is when the company will actually negotiate with your credit card companies to lower the total amount you owe sometimes by up to 60%. So if you owe $30K, they may try to get it down to between $12K-$20K. This option is more drastic allowing you to get out of debt much quicker but also it damages your credit more. That’s the tradeoff.

Read more information on my site, I answer a lot of questions you may have there then decide if debt management or debt settlement sounds the best to you before choosing a debt solution company.

Can I still be helped if credit card debt has been turned over to a Law Firm or Collection Agency?

Scott — Thu, 10 May 2007 19:45:04 +0000

Hello. Unfortunately, the answer is not very cut and dry. You can always be helped but it is a question of the type of help you choose. If you have been sued for credit card debt, you will not likely find a debt settlement company who will take on your case and so you probably want to seek the services of a lawyer who specializes in consumer debt problems.

However, if your credit card debt has been turned over to a collections agency, your options for a debt settlement program or debt management plan are most likely still possibilities. I suggest you speak with a debt counselor who can get the details of your situation. I you have a lot of debt and are considering bankruptcy, speak to a debt settlement company. If your debt is a problem but not something that cannot be fixed with a reduced interest rates, lower fees, and a 5-7 year payment plan, then I suggest a debt management plan.