What is debt management?
In a nutshell debt management companies
are entities that, for a monthly fee, will negotiate lower
interest rates on your debt and consolidate your debts into
a lower monthly payment. The question remains is a debt
management company necessary? In our opinion they are not.
Was it not you the consumer who got yourself into debt in
the first place? Is it not you the consumer who knows
exactly to whom and how much you owe? If you have answered
yes to these two questions and you are in a financial
position to pay your debt down if your monthly total would
be lower because of reduced interest rates, it is something
you should attempt doing on your own. If you are
successful, your payment will even be lower than what a
debt management company would negotiate because you would
not be paying their monthly fee! Remember credit counseling
companies are in business to make money.
If you can become disciplined and allocate a certain amount
of money towards paying your debt down, you can negotiate
lower interest payments yourself. We have seen it done many
times by clients. If you have decided to use an agency be
careful who you choose because there are many fraudulent
debt management companies out there and also some very
reputable ones, so pay attention to the following tips.
Beware of companies that want you to pay a fee up front
before they do anything for you. Watch out for companies
that advise you not contact a credit reporting company
directly, or that do not inform you of what you can do for
yourself for free. We also want to mention that debt
management companies differ from the credit counseling
requirement prior to filing a bankruptcy. Information
regarding the court requirements will be discussed in
detail in our bankruptcy section with links to
court-approved agencies.