Debt Management Program & Debt Settlement Plan – What’s The Difference?

Okay, you’ve got debts piling up and you do not know what to do. Let me, a credit card debt woman who is now in a free debt management program, assure you that there are debt relief options such as debt management programs and debt settlement plans you can choose from to get out of debt without filing bankruptcy.

No one really wants to choose any of the debt relief options but things tend to have a habit of happening when you are least prepared.

It’s wise to get familiar with them and you do have the debt relief options without the need for bankruptcy if things get bad.

First let’s look at debt management. A debt management program is designed to take all your bills and restructure them into one low monthly payment.

You pay one monthly payment until it’s paid off. The debt repayment program prepared by a certified credit counselor usually lasts around between two to five years, depending on the size of your debts.

One drawback to this is you cannot apply for any new credit cards or get loans of any kind.

Next up is debt settlement. Debt settlement, also called debt negotiation, is a debt relief program where your creditors agree to reduce your debts in exchange for one lump sum; it’s a process of negotiation with your unsecured creditors to convince them to give up their demands for the full repayment of your debts and instead to accept a lesser amount.

There is one major difference between the debt management and debt settlement though. Debt management usually ends with your debts being paid and your credit is reestablished while debt settlement isn’t so forgiving and usually leaves your credit in shreds. Recovering from this may take a while.

Consumers who use debt settlement are those who are experiencing legitimate financial hardships, cannot afford to repay their debts through debt management plans offered by consumer credit counseling agencies and who also want to avoid filing bankruptcy.

If neither the debt management program nor the debt settlement plan is what you want, then you had better keep all your bills paid down ahead of time through self debt management.

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