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Debt Management: The Ultimate Guide To Long Term Debt Elimination
If you find yourself drowning in debt, it can be difficult to stay on budget, which leads to collections calls, stress, and you falling even more behind on bills. Owing bills and not knowing how you are going to increase your revenue to cover the basics that you and your family need is a horrible feeling, and often leads people to believe they have nothing left to do but file bankruptcy. However, there are better options, you just have to know where to look. One way is to do your own research, look up your options online, read a ton of reviews, and then let it all sink in before you take the next step. Those living to payday to payday may be able to alleviate some of their stress by managing their debt better with the help of debt management professionals.
In most areas, there are local agencies that offer credit counseling, debt management programs, and debt management plans to help individuals and families avoid bankruptcy and pay off their debt faster. Advice from a credit advisor can go a long way in helping you improve your credit score, getting a mortgage someday, and may include a consolidated loan, if appropriate. It’s imperative though that you choose the best counselor out there and take responsibility for your situation.
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By taking advantage of credit counseling services, you can get the collection calls to stop and pay off all your debt about 36 to 60 months. However, before you choose a counsellor to work with you need to know more about debt management plans, programs, and ratios used determine the risk of financial disaster or recovery.
It’s also important to remember that having bad credit and too much debt can also affect you personally. It can knock you out of line for jobs, make lenders deny you increased credit, and can effect your mental health due to stress.
Debt Management is Part of Credit Counseling
Table of Contents
- Debt Management is Part of Credit Counseling
- Debt Management Plans
- What’s the Difference Between a Debt Management Plan and a Program?
- Why You Need a Debt Management Program
- Popular Debt Management Programs
- Debt Management Companies
- DIY Credit Repair and Debt Management
Some agencies or firms may claim to offer you consolidated loans or other solutions to reducing your debt with no strings attached, but credit counseling is the best way to avoid the same or a similar solution in the future.
When clients visit a credit counselor, debt management is automatically part of the plan. However, a credit counselor will take the time to help the debtors realize how they got into the situation they find themselves in. It may have been one serious event or the loss of a job that knocked a family’s finances out of whack or it could be a lack of spending control and bad investments.
Once the counselor knows how and why the debtors found themselves struggling to make ends meet, they can help them find a solution that will solve future problems before they get out of control. One of the first things all counselors will do when determining if a family should partake in a debt management plan or program is to determine what process is best.
Those looking for help from counselors should be prepared to look at spreadsheets, make budgets, watch videos, and listen to others talk about how debt recovery has changed their lives, even if it is hard to listen to or simply uncomfortable at times.
Debt Management Plans
First, let’s talk about debt management plans – often referred to as a DMP. At first glance, you may think a debt management plan is a budget. But it’s not. It is much more than that. It’s important to note that a debt management plan can only include some debts, usually only unsecured debts such as credit cards and medical bills.
What this means is student loans, federal loans, mortgages, and taxes can’t be reduced with fees and penalties eliminated. However, the right agency will also provide you with information, resources, and contact information for government agencies that can assist with different payment options. While it is nearly impossible to have these debts eliminated, it is possible to qualify for certain payment plans including in some cases hardship deferments and revamped financing.
If a consumer chooses to use a debt management plan to regain their financial ground, they will work with counselors who will assess their situations and come up with a viable plan to recover. At this point in the relationship between the individual/couple and counselor, it is absolutely necessary for the debtor to be honest with the counselor.
Everything shared in these consultations is private and won’t be shared with anyone outside of creditors and debtors. If debtors are ashamed or embarrassed about their situation and withhold information as a result, it only hurts the debtors. Creditors hear irresponsible, outrageous, sad, devastating stories every day. It is not their job to judge but to help. With all available information, they can do their jobs much better.
To do this properly, the consultant will interview the debtors regarding their open accounts and any other debt. An analysis of monies owed will be determined using a debt calculator.
For this type of plan, it’s important that the consumers close all credit cards. Monitor their credit report and keep a close eye on all statements each month. It’s also necessary for debtors to work closely with a firm when payments may be late or skipped altogether. Being late or skipping a payment could have much more severe consequences in a debt management plan than in a traditional payment plan.
“Should I Choose a Debt Management Plan?”
If you are worried about your ability to pay your debts or even foreclosure, you may want to consider a debt management plan as quickly as possible. The types of debt that can be managed in this situation include credit card debt, medical bills, and some collection accounts. It’s important to be leary of any company that advertises it can eliminate all of your debt.
Collection accounts cannot be included in a debt management plan if garnishments have been ordered by a court of law. Other debts that cannot be included in these plans include mortgages, home equity loans, auto loans, or student loans.
Unlike some credit counseling services not everyone chooses a debt management plan voluntarily. If a person files Chapter 13 Bankruptcy, they may be forced to manage their debt via this method to pay back a balance pre-determined by a judge.
If you have a great deal of secured debt that is making it hard for you to pay all your bills, you may want to work with credit counseling agencies to see what other options are available. However, if you are committed to working with an agency to reduce your debt and will be diligent about making payments to the agency every month on time, you can eliminate your financial stress by choosing this option.
Popular Debt Management Plans
Unfortunately, consumers must be very careful about the type of agencies they choose when opting for a debt management plan. Some plans may be popular, but don’t offer the services you need to be successful. To choose the right debt management plan, you must choose an agency that is:
- Accredited by the BBB
- Offers multiple solutions for a situation
- Reputation for being dependable
- Delivers a free consultation
When evaluating popular debt management plans, you should expect a proposal to pay off your debts, have a budget created for you, and expect the agency to work with creditors on your behalf. Some of the most popular debt management plans are available from:
In a typical debt management plan, a consumer will be expected to close all credit cards. Some agencies may allow a creditor to keep at least one card open for emergency expenses. However, the temptation of having an open card may be too much for some debtors. A typical debt management program will include all unsecured debt and take 3 to 5 years to pay off.
What’s the Difference Between a Debt Management Plan and a Program?
If you’ve considered any of these options in the past, you may be confused about the differences between a debt management plan and program. In many ways, the two debt relief options are very similar. However, a debt management plan is a bit more disciplined and requires a bigger commitment from the debtors for success.
Debtors enrolled in a debt management program have a greater risk than those in plan because in a program, the agency assumes the debtors’ debt and then pays off negotiated amounts with payments collected from the debtor.
If a debtor drops out of a program for any reason before payments are complete, they risk losing all the progress and concessions that were made on their behalf by the credit agency. What this means is they could actually end up in a bigger financial mess than they originally started because all the late fees and penalties that were eliminated during negotiations will be added back to the amounts due.
Why You Need a Debt Management Program
If you are working and can’t get all the bills paid every month or have had a setback that makes it impossible to pay every bill you have, you should consider a debt management program. These programs are designed to help people keep their assets, pay their bills, and get back on their feet before filing for bankruptcy, having possessions repossessed or garnishing wages.
If you think your situation is bad, it will only get worse if you don’t do something as soon as possible. As soon as you think you are going to be in financial distress, it’s important to consult with credit counselors specializing in debt management programs.
It’s also a good idea not to choose a debt consolidation or management company randomly or to choose the first company you come across either. Instead, you should gather as much information about local or global companies that you are interested in and compare. Make sure to compare what the company is offering, whether you think you can keep up and afford the fees associated with the service, and whether you got a good feel from staff. It’s also a good idea to look for reviews online, ask friends and family about their own experiences, or call the company and ask them to point you towards their testimonials or reviews.
Be leary of any company that has 100% positive reviews or those that have awful reviews. Most people tend to only leave a review when they’ve had a bad or over the moon good experience with a company. So a good rule of thumb is always to throw out the best review you read and the worst. The truth about the company, its promises, and what you can expect in your personal situation have a tendency to be somewhere in between.
Popular Debt Management Programs
If you’re unfamiliar with the term debt management program, you may be more familiar with debt consolidation. Each of these terms is relatively the same. However, each has their own pros and cons. When searching through debt management programs, you need to consider what services are the agencies offering. You will want to choose a company that has proven results and is dedicated to helping you make the best of your situation. For great debt solutions, you should consider services from the following organizations.
- Nationwide Debt Consultants (NDC)
- Enjay Debt Management Ltd.
- Apex Credit Management
- Knightsbridge Insolvency
Knightsbridge Insolvency specializes in debt arrangement scheme (DAS), which is a way to resolve unaffordable personal debts. It’s important to note the DAS is a UK-only program. Specifically, people residing in Glasgow, Scotland, and other areas inland. Similar UK-based programs are available in Manchester, London, Ireland, and Kensington.
Similar debt settlement programs can be accessed around the globe including areas along the Pacific Ocean, in Nigeria, Canada, and all across Asia.
Debt Management Companies
Debt management companies are available everywhere. Years ago these services were only offered in-person. Today, you can talk to a credit counselor online, by phone, or in-person. It truly is up to you. Companies offering debt management services are commonly found near universities, military bases, credit unions, charities, and housing authorities.
When choosing a debt management company, it’s important to check out the business’ reputation with the state attorney general’s office. If located out of state, you’ll want to check out the office located in the company’s state – not yours. You will also want to choose a company that is accredited by the BBB and offers solutions at a cost you can afford. To keep costs as low as possible, it’s best to choose a non-profit organization. Additionally, choose a program that is accredited by all or many of the following programs:
- Association of Independent Consumer Credit Counseling Agencies (AICCXA)
- Council on Accreditation (COA)
- International Organization for Standardizations (ISO)
- Better Business Bureau (BBB)
Trinity Debt Management
Trinity Debt Management has been trusted by debtors since 1994. The debt solution company understands how indebtedness effects personal relationships and mental and physical health. The non-profit credit counseling company is accredited by the FCCA and is a non-profit agency. Trinity Debt Management specializes in debt consolidation include programs and plans. Individuals and families are welcome at Trinity and the company can work with debtors with many different types of debt.
In addition to creating plans and payment budgets that meet a person’s needs, Trinity is also involved in helping reduce stress in its client’s life. This is possible because everyone that works at Trinity is aware of how the mind and body are affected by stress and how this can effect a person’s spirituality and well-being.
Debtors that have used Trinity Debt Management services in the past have been impressed with how well the non-profit credit agency has been able to handle their debt issues. Everything from teaching a family how to set a better budget or control spending to significantly reducing debt by eliminating late fees and penalties is covered by Trinity’s team members. When a debtor signs up with Trinity Debt Management, they can expect to take control of their spending.
Trinity manages debt and helps people learn where every penny of their budget is going. They also understand that money management is harder for some people than others. It’s never a quick fix, but once a person learns how to improve their money management through skills taught by Trinity team members, life will get better.
One of the teaching tools that Trinity uses is their book called Money Management Made Easy. The free book explains that anyone can learn how to manage their money by simply watching what they spend. No matter what a person’s budget is, planning and budgeting are what will make them richer.
Trinity Debt Management’s program takes challenging difficulties like excessive debt and creates a process that reduces it. Although the process looks overwhelming, it is easily tackled step-by-step during the debt management program.
First, debtor will apply to the program. Trinity has a nationwide reach and the initial application can be filled out online. Usually, a counselor will reach out to an applicant within 24 hours of filling out the short form.
After reaching out to you and considering all the information on the form you filled out, an analysis of your debt will be created. As a benefit of this program, debtors can expect to get one low monthly payment. Trinity can roll all unsecured debt into one low payment including credit cards, personal loans, and medical bills. The team will personalize your budget to accommodate everything you need to make the process as comfortable as possible.
One of the best reasons for working with a company like Trinity Debt Management or a company like it is that you can get debt free in 3 to 5 years. Even better, you don’t have to make huge payment or pay high interest rates to do it. Instead, you can make affordable payments. As long as you do this diligently, you should have no problems getting debt free in as little time as possible and for less than you would if you put the debts on a credit card or obtained a loan.
If you haven’t heard enough reasons to work with a debt management agency yet, you should also know when you work with a company like Trinity, you don’t have to work with the creditors. Instead, the agency can work with them on your behalf.
Usually, the team can reduce interest, fees, and balances by as much as 60%. What this means is you can walk around with your head up high, not be afraid to answer the phone, and you don’t have to worry about getting your wages garnished either. In the future, you’ll even have an easier time getting new, responsible loans at great interest rates thanks to a higher credit score.
Late fees and interest fees can also disappear when a debt management team works with your creditors. By eliminating late fees and interest costs, you can save hundreds or even thousands on your debt. Working with these companies and paying back the amount you own during the pre-determined schedule can help eliminate and bad rating or reviews on your credit report as well.
VA Debt Management Center
If you’ve received a letter from the VA debt management center, you will need to contact them immediately. A debt management company can also contact the agency on your behalf. People usually associated with the Veteran Affair Debt Management Center include veterans, anyone in the Armed Forces and their families.
Usually, a letter from this agency will be mailed when a person described above incurs debts as a result of their participation in VA compensation, pension, education programs, educations programs, and home loans originated before January 1, 1990.
The Veteran Affairs Debt Management Center is staffed by high-quality account receivable team members. Everyone working in this is trained in a high-value approach that makes them pleasurable and easy to deal with. If a person owes the VA money they have several payment options. Additionally, compromise offers and waiver requests may be offered.
It’s important to note that failing to respond to a letter from the VA Debt Management Center can result in the withholding of federal and state payments. Further delinquency can result in a referral to the Attorney General’s office for collection activity.
If your debt with the VA is unsecured, a debt consolidation agency may be able to help. Expert debt relief workers like those at Trinity Debt Management are able to work with agencies on your behalf to come to a solution that works for everyone.
Veterans, their families, and others in the Armed Forces that are suffering due to financial hardships can also appeal to the agency to help with debt management services. The agency is run by the government and has many resources available to help. Examples include refinancing options, deferments, and much more.
The agency can also help you receive counseling and pay utilities if needed. It is worth noting that those who are not affiliated with the Armed Forces cannot request or apply to the VA Debt Management Center. Instead, the agency is designed solely to help those in the Armed Forces.
Non-Profit Debt Management Companies
It’s important to choose a non-profit debt managment company carefully. Almost all reputable agencies have a non-profit status. But, it can be hard to determine who is legit and who is a fraud by simply doing a Google search online. This is especially true when everyone claims to be the very best in their industry online. While it can be difficult to determine, there are a few true-tell signs that will almost always help you find an agency, firm, or organization that is truly designed with the best of intentions. Use the checklist below to quickly add agencies to your yay or nay list. Most government entities recommend avoiding any agency that does not have non-profit status. However, it is important to note that because a credit counseling facility is non-profit, it does not mean there are not fees incurred.
Most agencies will charge clients a small, nominal fee to handle their debt management for them. Agencies with non-profit status are usually funded through grants, donations, and other monies. However, they charge a nominal fee to keep their overhead low. Some agencies will actually only ask for a donation. Almost all non-profit credit counselors will waive their administration fees if paying the cost would cause a financial hardship for the individual or family they are helping.
When considering a non-profit debt management agency, you should choose one that meets all or most of the criteria below.
- Been in business at least seven years
- Licensed through appropriate agencies
- Reasonable fees
- Willingness to waive fees for those suffering financial hardship
- Employes certified credit counselors
- Recognized by appropriate trade organizations
If you attend church regularly, you may want to ask the clergy for their recommendations regarding debt management. Some of the most famous debt solution agencies today have a Christian background. For instance, Trinity, mentioned above is based on religious beliefs. Another popular debt solution company is Catholic Charities.
While these agencies have a Christian or otherwise religious mission statement, they don’t deny services or increase prices based on faith. What this means is they will help debtors of any race, ethnicity, or another factor. However, it’s important to note that there will likely be religious undertones to the information provided. If this is bothersome to you or someone in your family, it may be best to avoid this type of credit counseling.
DIY Credit Repair and Debt Management
Although it’s not for everyone, some people will opt to DIY their credit repair and manage their debt themselves. However, it might not be absolutely by themselves. Thanks to gurus like Dave Ramsey and Suze Orman, more people are learning how to take ahold of their financial freedom by reducing debt, saving for retirement, and making sound investments that will prepare them for the future.
Information and how-to for dummies regarding credit repair, money management, eliminating debt, and other revenue solutions is available on the Internet. Blogs, news stories, local or global forums, and even customer reviews are easy to access and help many people define what needs to be done to make themselves even more financial secure.
What’s a Debt Ratio and Why is it Important?
If you’ve done any research regarding debt management, you’ve likely seen the term “debt ratio.” While you think you have the basics of the term, it’s important to understand every aspect of your families’ debt ratio in relationship to managing your debt.
Credit counselors and creditors will focus on your debt ration when making decisions and plans for your future. Basically, a debt ratio is the proportion between debt and total assets. However, there is much more to it than just that.
When your debt ratio is being figured, a credit counselor or creditor is determining how much dependence you have on debt to finance your assets. It’s a quick way to evaluate your debt balances and current assets.
The higher your debt ratio, the greater risk you pose in terms of defaulting. The lower your debt ratio, the lower your risk of defaulting or becoming delinquent on loans. Creditors use this ratio to determine if or how much credit should be allowed.
Credit counselors use this ratio to determine how to manage your debt and to determine ways you can pay it off as quickly as possible. If a debt management plan or program is completed correctly, a consumer can expect their overall credit rating to increase, which will make them financially healthier in the future.
Nationwide there are debt solution companies helping consumers decrease the amount of money they owe, which in turn increases their revenue and helps them become more fiscally responsible. The education and knowledge debtors can obtain through proper credit counseling can help them avoid a devastating financial crisis and help them plan for their golden years sooner.
However, the sooner you act, the better. Make sure to weigh all the pros and cons of every option mentioned above to come up with leads that will help you find the right foundation or agency to help you with your financial situation.
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