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Debt Settlement or Debt Management?

Created: On June 26, 2009 @ 3:36 pm In

The current economic climate has inspired an explosion of advertising offering [1] debt management and [2] debt settlement services to financially strapped consumers. If you want to resolve credit card debt, understanding your options can help in selecting a solution appropriate to your circumstances.

Got debt? Got a job? Try Debt Management

Debt management programs are debt repayment programs typically negotiated between a credit counseling representative and your creditors. Although credit card balances aren’t reduced, credit card companies may agree to waive late fees, over limit charges ,and reduce or eliminate interest for the duration of your repayment plan. Credit card companies require that you close your accounts and do not use any credit cards during your debt management program. You may be required to close your credit card accounts as a condition of your program. You’ll pay your debt management company an amount specified in your written agreement or contract. The company deducts its fee and sends the rest to your creditors. Credit card companies typically agree to report “paid as agreed” to credit bureaus during det management plans, but completing a debt management program doesn’t guarantee that you”ll qualify for new credit once you’ve completed debt management.

Debt Settlement May Assist Unemployed

If have no income, you may qualify for resolution of your debt through debt settlement. Debt settlement involves negotiating a reduction of the amount(s) you owe on credit card debt. Once a settlement amount is agreed upon, you’ll either make payments to credit card companies directly according to your agreement, or you’ll pay the debt settlement agent who negotiated the terms of your settlement. Before seeking debt help, there are a few things to bear in mind:

  • Damaged credit: Debts settled for less than the amount owed are shown as negatives on your credit reports for up to seven years. Making minimum payments may be preferable to the consequences of having lower credit scores.
  • Debt settlement can be expensive: Debt settlement companies charge for their services, and amounts forgiven by creditors may be viewed as income by the IRS. You can avoid paying fees by trying to negotiate debt settlement directly with your creditors. If this fails, and your remaining recourse is filing bankruptcy, it may be worthwhile to pay a debt settlement service.
  • Avoid debt┬ásolutions scams: Before hiring a debt settlement or debt management company, ask for references and check with your local Better Business Bureau and or state Attorney General’s office. Get everything in writing, and don’t pay a third party until they’ve provided you with an itemized statement of services and costs.

Although solving debt problems may be your first priority, learning how to live on a cash based budget is essential is an essential aspect of debt management.

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URL to article: http://www.debthelp.com/blog/2009/06/26/debt-settlement-or-debt-management/

URLs in this post:
[1] debt management: http://www.nfcc.org
[2] debt settlement: http://www.nj.com/columns/jjournal/index.ssf?/base/columns-0/1245651910110510.xml&coll=3