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Debt Management Plans - Debt Survival
By Kelley Kilanski
So either you're considering paying a visit to a certified credit counselor or you've already been to see one. Either way, the fact is you're deep in debt and don't know how you're going to pay them off. In general, you need help. Either you've been overwhelmed by unexpected but necessary bills, you've lost you're job but need to pay rent somehow, or you've simply lost control of your budget. Whatever the reason, you need help and a Debt Management Plan might possibly help. Whether one can or not will depend on your personal situation.
What is a Debt Management Plan?
In a Debt Management Plan essentially your credit counseling organization takes over the managing of most of your unsecured debts. They directly interact with your creditors in order to negotiate lower interest rates, eliminate fees, prioritize debt payments and arrange what you will pay. The credit counseling agency may be able to help manage most unsecured debts.
Before you sign up for a Debt Management Plan
Before signing up for any Debt Management Plan, you want to take some steps to do research and prepare yourself. The more prepared and informed you are, the better you will understand the process and options that are available to you even before discussing the situation with your credit counselor.
1 - Talk to your creditors yourself
The benefit of a Debt Management Plan is that all the negotiations are done for you; you simply make one monthly payment to the credit-counseling agency after you sign-up and they pay your creditors; and they may be able to provide a timeline for getting out of debt, which is really what the goal is. In going this route, you may have to agree not to use or apply for credit while participating in the Debt Management Plan.
2 - Find a reputable credit-counseling agency
This means research. Many of us have had trouble with debt at one point in our lives, so ask around and see if anyone has had success with a particular agency. Also, if you think you have found one, check with the Better Business Bureau, check online to see if this agency is reputable. Another option would be to, again, talk with your creditors and see if they work with that company. For me it turned out that the agency I chose didn't work with two of the creditors that I owed the most to.
3 - Work out a budget
Before making any financial decision, one of the first and most necessary
steps is to figure out just how much money you have coming in, how much is
going out, how much of your spending is necessary and how much isn't.
Deciding how much money you have coming in is easy, just look at your
pay stubs - printed or otherwise.
Deciding how much you have going out is not always that easy and it's important
to be honest and calculate everything. First, you need to gather
your bills and your receipts for all expenses, necessary and unnecessary. Add everything up to
get an idea about how much your spending. Second, list your expenses by necessary and unnecessary;
and, no, that $9 movie is not necessary. I was even told by a credit counselor that spending $50 a week on
food was too much and that only $20 was necessary. Of course, I was thinking,
'what world are you living in?'. While difficult to do sometimes, you will need
to make a decision about what expenses you can eliminate. When you have made these decisions,
you will then be able to see your financial situation for the future a little better and be better
able to discuss your options with your credit counselor.
Part 2 - Is a Debt Management Plan Right For You?
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