What do Debt Management Services Do Exactly?

Debt management services are companies that offer individuals help with lowering the money they owe creditors. There are two types of debt management services for profit and non-profit. Debt management services are an alternative to filing bankruptcy or obtaining debt consolidation loans.

Debt Management Services Assist Individuals

The services help individuals prepare budgets that can help people pay down their debt while not incurring any more. Typically, to develop budgets, the counselors meet with individuals and discuss their financial situations and the type of debts they have. These services also offer debt education classes. These classes include budgeting workshops and money management.

Debt Management Service Won’t Provide People with Money

Unlike debt consolidation lenders, debt management services won’t lend people money to immediately pay off creditors.

Debt Management Services Create Plans

For people with too much debt, counselors may suggest debt management plans also called DMP. In other words, the services are the middle men between individuals and their creditors. People pay money into an account each month. The debt management services then pays the creditors such as credit card companies, student loan lenders and medical companies. Typically, a DMP last for approximately 48 months to complete. Once the DMP is complete, individuals should be out of major debt.

Debt Management Services Work on Behalf on Clients

Some debt management services also negotiate with client’s creditors to lower debt. For instance, a counselor with a client in credit card debt can contact each credit card company on their behalf. The counselor’s goal is to lower monthly payments, reduce or eliminate finance charges and late fees or lower interest rates.

Beware Of Debt Management Services

Although many debt management services are legitimate and honest, there are some that aren’t. According to the U.S. Federal Trade Commission (FTC), people should be wary of debt management services that charge extremely high up-front or monthly fees. Although the services—even non-profit ones—charge for their help, the fees shouldn’t extreme. Also, the counselors shouldn’t pressure people into enrolling in DMPs.

Talk with a Lawyer

Before contacting any debt management service, people should talk with a lawyer who specializes in debt management. The lawyer can guide individuals through the complex process of lowering their debt. Also, the lawyer can assist in finding reputable debt management services.

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