Facts About Debt Management Plan
Decent debt management agencies hire counselors that have certificates and required qualification in consumer credit, budgeting, debt management and debt consolidation. In fact, the nonprofit organizations are legally obliged to offer education and free of charge courses in debt management.
However, keep in mind that far from all organizations in the area of debt management provide this sort of services. Some agencies claim to be nonprofit, at the same time urging you to make voluntary contributions or charge you high fees without telling you, thus make you drown even deeper in debts. Some agencies offer you various debt management plans or debt consolidation programs without reviewing your financial situation thoroughly. Moreover, the don’t offer you any financial literacy courses. There are other agencies that hide their for-profit status or obtain a nonprofit status to deceive the regulators, in fact their “nonprofit” debt management organizations represent the financial interests of other for-profit businesses involved in the area of debt management and consumer credit.
Several companies calling themselves credit counseling nonprofit agencies were sued by the Federal Trade Commission or the state Attorneys General for deceiving their clients about the fees, nature and benefits of their own. Some of the companies even flagrantly lied to the customers about having a nonprofit status. So, some of these companies under investigation are ceasing their activity, others that haven’t been sued yet also shut their doors. So, if you are in a debt management plan you may want to check your debt management agency to make sure you are not left behind when they disappear with your money.
In the view of the above-said, we’d like to present you a list of Must-Dos for people on a debt management plan.
Credit counseling agencies often offer their clients in debt to pay out the debts via a debt management plan. This means that every month you have to deposit a monthly payment with your debt management organization. This organization then distributes the money among your creditors – credit card companies, medical institutions, educational establishments, and other unsecured debts. They do it according to a specially agreed repayment schedule that they have worked out together with your creditors. Sometimes, creditors lower your interest fees or discard some fees when you are in a debt management plan.
However, it is not always as good as it sounds. The Federal Trade Commission’s investigation roved that some of such organizations deceive and defraud consumers. So, the best thing to ensure your security is to check these things out:
- before you make any payment to the credit counseling agency, make several phone calls to your creditors to make sure they have accepted the alternative debt management plan the agency offered.
- If yes, make sure you pay regularly and in time.
- Always, but always make sure you read and understand your monthly statements, so that you are sure your creditors are receiving the payments according to your debt management plan.
- If under some circumstances you are unable to pay in time or you find out that the creditors are not receiving your payments – contact your debt management company as soon as possible.
You should understand that if your creditors are not receiving your payments on time and in full amounts, you may lose essential part of your credit score and remain as deep in debt as before or even worse. Not to mention the benefits given you by the debt management plan – lower rates and fees. Event though your creditors have forgiven your late payments before you were on debt management plan, it doesn’t mean they will be willing or even able to forgive you late payments after you got engaged in a debt management plan. You will no longer be able to “re-age” your accounts (reported as current) if you enroll in a new debt management plan with a new debt management organization.