Debt Management Programs

Is it Debt Management or Debt Settlement?

Debt management companies will work with your creditors to lower your interest rates and establish some kind of workable budget for you. These are offered by for-profit or non-profit organizations. This is essentially the same as credit card debt counseling services.

This service is being offered now by companies traditionally offering debt consolidation and debt settlement or negotiation. They seem to have become a one-size-fits-all deal, and there are very few distinctions in the debt relief industry.

In essence, if you are delinquent in your payments, you are not eligible for the debt management program. If you are current in your payments, a company will enroll you in a debt management program. However, the debt management program is a repayment of the entire debt plus a monthly fee to the company for handling the transactions. So this is similar to credit counseling, without the “education.”

Since the same companies advertise successful debt settlement, it is curious why their clients would opt for the debt management program rather than the debt settlement program. The easy answer is that if you are current in your payments, you are not eligible for a debt settlement program. This is because creditors will not even negotiate with you (or a representative for you) when you are current on your account. So, once you have become delinquent in payments, you become eligible for the settlement program.

The better solution is to manage your own debt settlement and save thousands of dollars and possible headaches of dealing with debt management companies. Many people have had to drop out of these programs and wind up wasting valuable money, only to find that the debt was not reduced in any way.