Debt management plans are designed to help consumers who cannot manage their monthly bills. The Federal Trade Commission (FTC) advises consumers only to use debt consolidation companies that also provide counseling. They also recommend using a debt management firm in person instead of an online company because the arena is rife for fraud and scammers as consumers look for ways to get out of debt.
Step 1
Meet with a credit counselor before you sign up for a debt consolidation or debt management program. The counselor should be a trained financial professional who reviews your bills and income to determine the best way for your to handle your debts. They should not be salesmen trying to sign you up right away.
Step 2
Read the contract before you sign up for the debt consolidation plan. Although many consumer credit organizations are nonprofits, that doesn't mean that they are free. There is always a fee for the services. Sometimes it is veiled in higher interest rates or it is charged as a percentage of the debt you owe. Look for the fees and make sure you are clear about the total costs of the service. Ask the company how it makes money and how employees are paid so that it is all clear before you begin.
Step 3
Check with your creditors once you've signed up with a company to make sure they are willing to accept payments made through a third party. Many consolidation companies also will try to negotiate lower payments. It is up to you to verify that the offers have been accepted.
Step 4
Pay the consolidation company every month on time. They should receive just one payment to cover all the bills that have been consolidated. A debt consolidation firm will charge you interest and fees if you are late. You will not be able to renegotiate your bills in the future if you default on a debt management plan.
Step 5
Check the debt management company's work. Read your account statements to make sure all the payments have been made as agreed. If you realize that your creditors have not been paid for whatever reason, cancel any automatic withdrawals the debt consolidation company has ordered and begin paying your creditors directly again. Notify them of the new arrangements.
Tips and Warnings
- Get all the facts of your debt consolidation plan in writing from the company.
- Beware of "too good to be true" offers that eliminate debt or make promises of clearing your credit score. There are many scams that take advantage of people with poor credit. Paying off loans through a debt consolidation company can be expensive and time-consuming. There is no easy way to eliminate debt.
Things You'll Need
- Contract
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