Erasing Personal Debt Through Repayment Plans–When Is A Debt Management Plan Helpful For A Consumer?

Many consumers often turn to various repayment plans as a way to help them erase debts which may be present and causing problems in their personal life or when setting future financial goals, but there is usually a hierarchy of steps in the debt relief process that consumers will take before turning to more extreme measures in the hopes of erasing debts that they owe. Obviously, the unemployment rate has remained high over the past months and, despite indications that jobless claims decreased in the middle part of May, there are still some consumers who are finding unemployment the main cause behind their financial distress, while others are simply sticking to an old consumer habit of spending more than they can afford to repay.

Yet, debt management plans are one of the options that consumers may have when they are in a particularly severe situation, but might not be on such a distressed financial ground that there are few options left but to either default or seek out debt settlement. Debt management is usually one of the later steps that a consumer may take behind implementing personal financial practices that are more responsible or consulting with a credit counselor in order to better formulate a strategy to repay debt obligations. Many consumers are aware of what a debt management plan is, but there are still those who are confused over whether debt management and debt settlement are the same or completely different routes consumers may take.

Before getting into when a debt management plan will be helpful for consumer, we must first understand that there are some organizations that will advertise debt relief under a variety of titles and, if a consumer is not careful, they may fall for a trap that says a company may be able to help manage their debt through a settlement program. Debt management is simply an act of a counseling agency working out reduced payments between creditors and a particular consumer, while debt settlement works out agreements to the point where a consumer will pay less than they originally owed.

Debt management is advantageous for consumers who may be in a position to pay their debts but simply cannot meet the minimum payments that are currently required and this can be seen in a favorable light by lenders or creditors, due to the fact that a consumer wants to honor the debts they owe but cannot meet certain payments at their current levels. Many creditors are willing to work with consumers who may have a good payment history, as some men and women who have faced unemployment over the past months or years or may be in a situation where they have seen their salary cut could have gain sympathy from creditors as, again, management of debt only requires more affordable monthly payments.

As always though, consumers must make sure that the counseling agency they work with is reputable and accredited since a debt management plan will require a consumer to make payments to their counseling agency that is implementing this management program, which will then be divided out among creditors as per agreements within the debt management plan. Also, consumers are usually advised to continue making payments to creditors until a debt management agreement is worked out and even go so far as to contact creditors to make sure the debt management plan terms are acceptable and creditors will now begin receiving payments from the counseling organization in charge of this particular type of debt relief option.