Posts Tagged ‘debt management’

How Does A Debt Management Program Work?

A , as the term suggests, is a specific plan to manage debts in such a way that makes it easier for the debtor to achieve a debt-free life. These types of programs are also commonly referred to as DMPs. There are so many companies out there that offer such services, but not all of them are trustworthy. Since 2005, when the new bankruptcy laws were introduced, hundreds of such companies have gone out of business because of fraudulent practices. Therefore, you must be very careful when it comes to choosing the right program for your specific situation. The following steps can help you.

Choose A Reputable Company

First of all, it is very important to make sure that the debt management program you are signing up with is from a reputable and well-established company. You can get a clear idea about the quality of their services by checking their records with the State Attorney General’s Office of Consumer Affairs and with the Better Business Bureau. Obviously, the best company is the one that have fewer or just no consumer complaints against them.

Work Hand-In-Hand With The Financial Counselor

In most cases, the company will appoint a financial counselor for your case. The counselor will not only negotiate a more favorable repayment plan with your creditors but they will also help you regain control of your finances by creating some attainable goals through a realistic budget. Your active co-operation is crucial here. Keep your expectations and calculations realistic. A debt management program is no magic wand. It is only a process that can allow you to pay off your debts easily and to get your finances back on track.

Ask For A Detailed Written Agreement

In order to be on a safe side, you must ask the company to provide you all the terms and provisions of the program in a detailed written agreement. Read all the points thoroughly before you sign it. The agreement must contain each and every piece of information, including the list of debts and creditors and the guarantees and promises made by the company. No matter how lucrative the promises are, it is not wise at all to trust a verbal agreement. Get everything in writing.

Approval From Creditors

A debt management program makes sense only if your creditors agree to it. It is very important for you to understand that there is no legal obligation on the creditors that they must agree with a DMP. It is entirely up to them to decide whether they accept the proposal, reject it, or make a counter offer.

Be In Regular Contact With The Creditors

These programs require you to make the payment as per the restructured plan to the and then company transfers the funds to your creditors. In order to be on a safe side, you must keep in touch with your creditors; the idea is to make sure that the payments are being made in time and that your accounts are current.

You must also review the monthly statements very carefully. If over-the-credit-limit charges or late fees are still showing up on the statement, you should immediately contact the company that is handling your debt management program.

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