Debt Management Plans

Debt Management can be similar to either Credit Counseling if the business is a non-profit entity or Debt Settlement with the exception that the Debt Manager holds the debtor's funds for repaying their creditors in a trust or escrow account.

A Debt Management program is based on programs of the creditors with loans enrolled in the program regardless of the financial condition of the debtor. Loans of non-participating creditors enrolled in the management program may have different settlement objectives and the debtor may be charged separate service fees. Many states have laws specifically controlling the practice and business licensing requirements for Debt Management companies. Be sure to check with your local State Attorney General's office as well as you local Better Business Bureau before committing to any particular Debt Management Program.

Benefits - Many creditors participate and will lower interest rates for debtors enrolled in the program. Other creditors can be included with separate settlement objectives.

Pros - For debtors having problems managing their own funds a Debt Management program can provide a financial plan, budget and properly allocate the income of the debtor.

Cons - Debt Managers hold or control debtor funds for which the debtor must verify that the business practices include insurance and safeguards protecting debtor funds and payments to their creditors. The debtor could be penalized in the event the Debt Manager fails to make timely payments to creditors. Pros and Cons are similar to those of Consumer Credit Counseling companies.