What is Debt Management? When one is over their head in debt and is struggling to make even the minimum monthly payments, it is time to bring in the specialists for debt management. They are agencies that advise you on how best to resolve your situation without resorting to the ultimate step of declaring bankruptcy.

Their credit counselors will help you to consolidate all your various outstanding dues into one manageable monthly payment; they will work out a deal with your creditors and help you to control your credit outstanding. Each of your creditors will receive a portion from this monthly payment proportional to their dues; this way you will be making regular payments, your creditors will be receiving some regular payments and best of all, collection agencies will be off your back!

The debt management professional will help you to understand your financial situation and to figure out a realistic and viable budget to help you get out of debt, which in turn will help you pay off your bad debts and restore your credit rating. In some cases they might even work out a very favorable debt settlement program in one single lump sum payment, enabling you to become debt-free in one stroke.

Opting for a debt management plan usually entails repaying your entire debt, although some debts may be forgiven by your creditors; they mostly agree to take the payment over a period of four years, maybe even up to five years. Some agree to a reduction or writing off the interest due on your debt, though such agreements are voluntary and not legally binding. Any wage garnishment will not be stopped, unless the creditor explicitly agrees to do so.

A debt management plan is best suited for you if you are unable to get a debt consolidation loan, because your credit rating is poor or you have five or less unsecured creditors; or if you can afford repay the debts, but need an extended time to do so, without attracting more interest. This can be of great help if money management skills are all it takes to get your finances in order. Then, in case your debts are so huge, that they are unmanageable, even with budgeting and reducing expenses, the credit counselor works out a debt management plan with your creditors.

You will be making a regular payment to the agency and they will distribute it to your creditors. If you are unable to repay the debt in full, a consumer proposal may be presented, where the creditor agrees to take part payment and forgive the rest. Only in extreme cases it is suggested to declare bankruptcy. There is no crime in doing so and one can make a fresh start.

Loss of income due to losing your job or a business failing, leading to losses incurred; outstanding student loan and debts from coping with an accident or serious illness are some common causes for people ending bankrupt; on average about 100,000 people in Canada go bankrupt every year; so there is comfort in numbers, as the national savings rates are at an all-time low, it is not surprising that many people end up with financial difficulties and have to go in for debt management. What is Debt Management?

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