What is a Debt Management Plan?

Okay, you’ve heard the ads and the hype from the debt helper companies about debt management plans and debt settlement plans that will restore your financial health in the blink of an eye. You’ve already tried to cut expenses drastically and stick to a tight budget but you don’t think it’s going to be enough. Where do you go to cut through the claims that sound too good to be true and get some straight information? We have two sources for you to consider:

1. Credit Counselors
2. Licensed Bankruptcy Trustees.

Credit Counselors

Most people start with a credit counselor who can review their financial situations and offer advice on the best alternatives for them. Since the explosions in the number of people needing help, a lot of unscrupulous providers have entered the credit counseling business so be careful in making a selection. Interview several and pay particular attention to their fees. Some of the more reputable ones are not for profit providers and will charge you on a sliding scale while others end up costing much more than you would think. Indeed, some experts caution that some credit counselors end up costing far more than bankruptcy or other alternatives.

Basically, what a good credit counselor will do for you is set up a debt management plan to repay all of your debt over a specific time period, usually no longer than 4 years. The counseling service presents the plan to your creditors and if they agree you end up making a single monthly payment to the credit counseling service, which then pays the creditors off a little at a time. Some services work to reduce the interest rates you’re paying on credit cards and eliminate late payments.

Generally speaking, the less you owe, the better your chances are of being eligible for a debt management plan. If you have no assets which will allow you to get a debt consolidation loan or if your credit is already poor, a debt management plan might be right for you. If, however, you are deeper in debt, you may need to look at other options. These options are available from the second category of professional debt management professionals we mentioned earlier – licensed bankruptcy trustees.

Bankruptcy Trustees

There is one compelling reason to start your search for professional assistance with bankruptcy trustees. There are several different solutions to debt problems and of all the people out in the market; bankruptcy trustees are the only ones who are knowledgeable in all options. While some credit counselors might understand the basics of filing for bankruptcy in Canada or in filing a consumer proposal, few can give you the specifics you might need to know to make a decision. Trustees are fully aware of the advantages of debt management plans and will recommend that option if it is right for you.