What Is a Debt Management Service?

Debt management programs are often touted as an affordable means to settle outstanding credit card debt and an alternative to filing for bankruptcy. In Albuquerque, credit counselors work with debtors to develop a debt management program that suits each client’s needs. The debt management professionals encourage debtors to consolidate their debt into one low-interest payment. Most credit management companies in Albuquerque offer a wide range of services that help debtors manage their debt and avoid bankruptcy.

Consolidation of debt helps debtors save money because they can choose to set up a repayment plan that will result in one low monthly payment. Credit counseling agencies negotiate with creditors on behalf of debtors. They educate the creditors about the provisions of a debt management program and negotiate a reasonable payment plan with the creditor. Full repayment of the debt typically takes up to four years, depending on the amount of debt and the interest rates.

A debt management program offers an appealing alternative to bankruptcy. Bankruptcy filing is reserved for people who can’t pay their debt within 60 days. Once, the debtor files for a bankruptcy, his or her credit rating is damaged. Creditors do not want to take on another delinquent client. By entering into a debt management program, creditors can collect a percentage of the debt from the client.

In addition to monthly payments, most debt management companies also provide budgeting advice and financial education. This allows individuals to avoid spending money they don’t have or that won’t be easily re-earned. Some debt counseling agencies provide legal representation when creditors try to collect a debt from a debtor who has entered into a debt consolidation program.

Bankruptcy filing requires court approval, and it carries a negative impact on a person’s credit score. The effects of a bankruptcy stay with the individual for years after the case is complete. Debt relief agencies help clients explore other options before filing for bankruptcy.

For individuals with large credit card debts, debt settlement programs may be the best option. Settlement programs offer payment plans with reduced amounts that can help individuals to repay their debts in two to three years. Creditors are usually willing to negotiate as long as the settlement terms are agreeable. An experienced debt management company can negotiate with creditors on the behalf of its clients. If debt settlement doesn’t work for an individual, bankruptcy may be an option.