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Debt Management - Superior Solution. Beware of Debt Negotiation and Debt Settlement Programs

The following information was reported on July 14, 2002 in the Palm Beach Post by *Liz Pulliam Weston:

"With debt settlement, creditors typically report that you've paid less than you owed. That stays on your record for seven years and lowers your credit score. What's more, that "forgiven debt" might be considered taxable income to you. So, in addition to trashing your credit report, you also might have a hefty tax bill to pay."

*Liz Pulliam Weston is a contributor to the Los Angeles Times.

Debt Management - Superior Solution

Debt management combined with debt consolidation is a process by which a company will negotiate with creditors to obtain the lowest monthly obligation needed to satisfy and bring current your delinquent accounts.

Debt management programs are designed for individuals who have accumulated a fair amount of unsecured debt and are unfortunately unable to make the required monthly payments.

A person will contact a debt management company because they have fallen behind on some of their payments. Usually, when a debt management company is contacted, the clients minimum monthly payment has doubled or tripled because of accumulated interest charges and rising interest rates. Debt Management companies realize that after falling behind in payments, late charges are added on monthly, thus ever increasing the clients debt and greatly decreasing the ability to pay it off in a timely manner. A debt management company understands that personal crises can occur which also contributes to the cash flow problem; thus it becomes impossible for the debtor to catch up and despair often sets in. This is where debt management and the use of certified credit counselors can help.

Debt Management Working Together with Creditors

Debt management companies who have certified credit counselors actually can help individuals by contacting all of their unsecured debt creditors on their behalf and notifying them that their client has enrolled into a debt management program.

Usually, creditors acknowledge the fact that the client has taken the initiative and enrolled in a debt management program combined with a debt consolidation. Creditors, realize the ever-increasing amount of individuals who are financially over-extended, and is seeking professional help, and usually will work with a debt management company and offer some form of relief.

Creditors, on the other hand also realize that if they don't help you out a little, there is a greater chance that the client will file bankruptcy, and the changes of receiving any payment is greatly reduced to zero. Through debt management combined with debt consolidation, creditors can at least recover the principal on your debt.

Debt Management - Non- Profit Organizations

Most debt management companies are "non-profit" organizations. Most creditors will only work with non-profit 501(c3) debt management companies. This allows the credit companies to recoup a significant portion of the "lost interest charges" through tax write-offs.

Debt Management companies negotiate with your creditors to reduce and at times even eliminate high interest rates with your one monthly payment made directly to the debt management company is portioned out to your creditors.

Debt Management companies, in almost all cases lower your payments - - perhaps by as much as 60% -- than the sum of your individual account obligations.

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