Is debt management an option?
Debt management companies negotiate on behalf of the borrower, in an effort to reduce the monthly amount that they need to repay towards their unsecured debt. They can only deal with unsecured debts, not secured mortgage payments, so this is the first factor in deciding whether or not a debt management company is an option for you.
If you are struggling with your mortgage payments because your unsecured debt repayments are too high, a debt management plan could help as these outgoings will be accounted for.
If credit card debt is your sole or most significant concern, a debt management plan can make good sense. It allows you to get your finances under control with a single monthly payment and can show your creditors that you’re committed to repaying your debt.
Essentially, the debt management company will negotiate with the unsecured creditors to allow you to make reduced monthly payments to your debt. Their strength lies in the continuing development of a relationship with the personal lending companies, helping them come to an agreement quickly. The current economic climate has meant that more companies should be willing to accept the debt management plan rather than add to their list of bad debt written-off.
The system of debt management is not without some considerations. The role of a debt management company will be reflected on your credit report and although the ramifications will not be as severe as bankruptcy, it will have some effect. However, if you have been missing payments to your unsecured debt, it is likely that your credit rating will already be damaged.
Obviously, it is wholly preferable to avoid the entire situation in the first place. Debt management plans aren’t a license to ignore the issues surrounding underlying financial problems. Dealing with debt before facing impending bankruptcy is the core lesson but debt management is an option for those who want to get their finances back under control.