Usually when we talk about debt management we are referring to assistance given to debtors by a third party. This assistance is usually of the expert variety with the aim being to help the debtor to return to a position where they no longer owe money. In recent years there has been a huge rise in the number of people struggling with debt and this type of assistance is increasingly required. Many businesses have sprung up and these promise to offer debt management solutions; not all of these are good options.
What is a Debt Management Plan?
In most instances this type of service will involve creating a debt management plan. This is a strategy that is developed with the assistance of a third party for a realistic path that you can take out of debt. It is vital that this plan is something that you will be able to follow because in a lot of instances it will be used to reach an informal agreement with the creditor. The third party who is working on the behalf of the debtor will take the plan to the creditor to see if they will agree to the proposal. In most instances the creditor will say yes to the plan because they might see it as the best option for getting at least some of their money back.
One of the great benefits of a debt management is that you can often get the creditor to agree to accept less money than what you actually owe. If you can prove that you only can afford to repay a certain amount then the bank might consider this on the basis that something is better than nothing. It is important to keep in mind though that the creditor is under no obligation to accept your proposal. The third party who will be trying to organize the deal should be experienced enough to suggest a proposal that will work out well for everyone. You should never agree to any debt management plan unless you are certain that you can meet the terms of it; failure to meet the terms could lead you into further hot water.
Is Debt Management the Best Option for Everyone?
Debt management is something worth considering if you are struggling with debt but caution should be taken before choosing a third party to help with this. It should also be noted that a debt management plan isn’t going to be possible for every type of debt; you usually won’t be offered this option for a secured debt like a mortgage. It is also rare for this type of plan to be a viable option for people who owe less than $10,000 to a creditor. Those who decide to choose this type of debt solution also need to be aware that it is likely to damage their credit rating and they won’t be able to borrow money until they have met the requirements of the debt management plan.
You may also want to read about Debt Consolidation: https://www.econguru.com/what-is-debt-consolidation-and-is-it-a-good-solution-for-everyone/