Debt management plan

What is a debt management plan?

A “debt management plan” is one way to repay money you owe. Here is how it works:

• A credit counselor works with you and the companies you owe money to.
• You all agree to a plan for how you will repay the money you owe.
• Sometimes the companies agree to a lower interest rate.  Sometimes they do not.
• Every month, you deposit money into an account with the credit counselor.
• The credit counselor pays your credit card, medical, or student loan bills.

This continues until your debt is repaid.

Debt management plans might help some people. These plans do not help everyone. A good credit counselor can help you decide what might help you.

What is a debt settlement plan?

Some people say a “debt settlement plan” is a way to repay money you owe. But many companies that offer these plans make promises they cannot keep.

Some companies say:

• They can help you pay less than you owe and get out of debt.
• They can get bad information taken off your credit report.
• You should stop paying your bills and send the money to their company.

Many people who use debt settlement plans find they owe more money, not less. These companies charge you a lot of money, and then they do not help you.

Where do I start?

• Make a budget
• Write down what you make and spend in a month
• Look at where your money goes
• Look for ways to save money
• Call the companies where you owe money
• Explain why you have trouble paying the bill
• Ask for a plan to let you pay less each month
• Get help from a credit counselor

How can I get help?

Look for a credit counselor who will meet you in person. Then ask questions. These questions will help you select a counselor:

• What can you do to help me?
• How much will I have to pay?
• Do you have free education and information?
• Are you licensed to work in my state?

Look for a credit counselor who can do the most for you. You might have to pay some money for help. But a good credit counselor will not ask you to pay in advance.

When you get the validation notice:

See if you recognize the debt. The notice should list the “creditor.” The creditor is the person you owe money to. You can call the creditor to get more information.

If you do not think the debt is yours, follow the instructions in the notice. It should tell you what to do next to question the debt.

If the debt is yours, make a plan for how to pay it. Talk to a credit counselor.

If you want the collector to stop calling:

Write a letter to the debt collector. Tell him to stop calling you immediately. Send the letter by Certified Mail and ask for a “return receipt.” The law says he must stop calling you when he gets your request in writing.