Erasing Debts Through Debt Management Plans–Can Consumers Benefit And Find Debt Relief By Turning To A Management Plan?

Erasing personal debts through a debt management plan can be beneficial in that consumers are able to get a more affordable monthly payment on their overall debt obligations rather than continuing to struggle to meet various debts, like credit cards and loans, which could potentially lead to missed payments and damage to a consumer’s credit score. However, many ask, are consumers able to benefit from these debt management plans and find debt relief without doing a substantial amount of damage to their personal financial life?

Essentially, consumers who enter into a debt management plan typically work through a credit counseling organization and agreements are made between these counselors and a consumer’s various creditors, which essentially states that consumers will be able to meet lower monthly costs on their debt obligations in return for paying the entire amount despite a consumer being in a difficult financial position. Obviously, credit card lenders and various creditors will need to be contacted and agreements worked out, which could take time, but consumers who continue to make payments to their creditors during this time frame, contact their creditors after an agreement has been reached and make sure that they have accepted the conditions that their payments will be made from the credit counseling organization’s DMP are a few steps that consumers need to take before they begin paying a credit counselor charged with implementing this debt management plan.

Factors like missed payments, consumers who stop making payments before a debt management plan is worked out, or those who may work with a credit counseling organization that is less than reputable are factors that can lower a consumer’s credit score during a debt management plan, but for consumers who find a reputable organization and have creditors who are willing to work with them in a debt management plan, there are differing opinions on whether a credit score is still in danger.

Benefits from a debt management plan are, again, simply in the form of more affordable payments on debts and the likelihood that a consumer will be able to repay their debts entirely without either missing payments or having to default on all or a percentage of what they owe. Debt settlement, on the other hand usually works out an agreement with creditors in which they will accept less than they originally were owed by a consumer, but since a debt management plan has a consumer meeting all of their debt obligations, but at a lower monthly cost, this can be seen in a more positive light by some officials. As an example, Bankrate.com reports that FICO officials typically do not factor in credit counseling when a consumer is attempting to erase debts, as many individuals who are using a credit counseling agency are simply those in a difficult financial position but still want to honor their debts.

However, many consumers understand the benefits of a debt management plan, however, in cases where a creditor may have to close an account, like a credit card account, this could result in a decrease in a consumer’s score, but of course, factors like missing payments or defaulting entirely could be much more severe, and for these reasons, a consumer needs to take as many actions as they can to avoid damage to their score when debt management is necessary. While a debt management plan is not always helpful for every consumer, those who feel that it is in their best interest must make sure they are working with a reputable counseling agency, keep in contact with their creditors and continue to make payments until creditors have entered into a debt management agreement and a consumer is required to begin making payments to the counseling agency.