The need for a debt management plan (DMP) has seen an upsurge in the recent years. The unfavorable shift in the economy has put a lot of people in a situation where they have to balance several payables all at the same time.
The main objective of a DMP is to help you, the debtor settle all your financial obligations with your creditors. The important consideration here is the debtor’s ability to repay. This could include bargaining for a hold on future interest on longer payment terms or balloon payments every so often and other payment schemes. A debtor can negotiate with his creditors on his own or avail the services of DMP providers like non-profit credit counseling services. These providers are composed of experts that can negotiate with your creditors advocating your payment capacity on your behalf. You may have to pay for their services but you will find that in the long run, the costs are worth it.
Speaking of fees, the government supports consumers by asking debt management companies to refrain from asking for upfront payments. They are also encouraged to bill the debtor for service fees only when there is an evident favorable arrangement with the creditor.
Whether you choose to work on it on your own or through an expert, a debt management plan will keep you on the right path.
How to Enter into a Debt Management Plan
Before you will be entered into a program that involves a DMP, you will be analyzed by a credit expert/counselor/consultant. They will determine if you are really in a financial crisis. This will be done through an Income and Expenditure analysis.
Most legitimate debt relief companies will not work with you if your intention is to swindle creditors into believing you are unable to pay for the original debt amount. They will not help you get a lower interest rate if it turns out that you are more than capable of paying for your current debt.
Other than that, there are no more qualifications needed to avail of this program. A good credit is score is definitely not needed anymore.
What a Debt Management Plan Involves
Once you are deemed qualified, the debt management consultant should be able to know how much you can afford to pay. This is where the foundation of your debt management plan will be built on. This amount will be the difference between your income and your expenses. It is called the disposable income.
The amount stated on your disposable income will be shown to creditors. The consultant will negotiate on your behalf so the creditor can agree to a lower outstanding debt and interest rate. Once an agreement is made, you will be paying through the credit consultant. A FDIC insured account will be set up for you where you will deposit the funds and where the consultant will get the money to send to the creditors. They will provide you with progress reports so you stay updated on how your debt management plan is slowly relieving you of your financial troubles.
An FTC Reminder for Debtors Under DMP
When looking for a debt relief company to help you with your DMP, the FTC or Federal Trade Commission released a couple of reminders. First of all, you need to look for an expert that is trained in budgeting and management of debt, money and consumer credit. One way to tell a sincere debt relief expert is when they only tell you that you need a DMP after looking at your finances. A company that tells you that a certain method is the right path without looking at your figures is only up for the sale of their service. These are the companies that are not really concerned about debtors and will not educate you on the best practices of finance management.
Also, refrain from getting the services of those who ask for voluntary payments and upfront fees. This is discouraged by the government and a lot of debt relief businesses followed suit.
An important reminder is also sent out to debtors receiving monthly statements from the consultant handling their debts. Review every little detail to ensure that the payments are being done according to the DMP.
On the side of the debtor, the FTC requests them to stay true to the new payment scheme given to them. The government cannot support them from the consequences that the creditor and debt relief company will enforce if they veer away from the details of the DMP.
To find out more guidelines about this, go to the FTC site for the DMP page.
NationalDebtRelief.com will help you with your debt and help you slash your principal balances instead of just lowering the APR. Give them a call through the toll free numbers on this page. You can also fill up the form on the right side of this page and someone will get in touch with you immediately. A live chat support is also available so you can immediately get a consultation during extended business hours.
National Debt Relief helps people nationwide resolve $10k or more in unsecured debt. Our debt coaches negotiate with creditors on your behalf so that you pay a fraction of what you owe and can become debt free in as little as 24-48 months.
