A debt management plan typically offers a solution in which you can pay off debts at a monthly rate that is affordable to you. Debt management companies don’t lend money or pay off debts.
No credit checks are needed due to the fact that the debt management company is not lending you any money.
The company will try, however, to make sure that you have enough money above and beyond your everyday cost of living to make your monthly payments.
The debt management company will not make any payments for you to your creditors if you are unable to make the monthly payments agreed upon.
During the initial meetings with the debt management company questions will be asked regarding your income and expenditures, your money coming in and your money going out.
This is to attempt to make sure that you will have enough money to make the reduced monthly payments and still have enough money left to live sufficiently.
Because you will be making reduced monthly payments it will naturally take a longer time to be debt-free. The debt management plan will use the evidence you provide to calculate the length of the repayment plan.
The debt management plan tries to offer people in debt to become free of the debt in a practical way that is within your means.
It is extremely important for you to be straightforward and honest with the management company so that you can reasonably afford to make the monthly payments agreed upon.
Some creditors may make false claims to refuse to deal with debt management companies. A creditor can’t take you to court for non-payment of your debt while at the same time refusing payments from your debt management company.
You have the legal right to use a debt management company to attempt to repay your debt. Regardless of whether or not the creditors would rather not deal with them in order to put more direct pressure on you.
Debt collectors hired by creditors have been known to make threats. They may tell you that your house could be repossessed or that they will send a bailiff to your house to collect the money.
But, unless the sheriff’s department or the county court orders the bailiff they have no legal right to do this. Some creditors use these threatening strategies to put pressure on their debtors.
Unless these creditors have a court order to follow through on these threats they have no legal right to harass you with these threats.
Making a plan with a debt management company means that you are not adhering to the original agreement with the lender. This will have a negative effect on your credit rating.
Just like once you defaulted on your payments to the lender you broke the terms of your repayments to them, which has a negative effect on your credit rating.
It is well-advised that you cut up your other credit cards and store cards until you have completely repaid your debts.
If you try to keep other cards for emergencies and other creditors learn of this it could have a negative result.
They may likely reject your offers of repayment and try to collect their money through court action. Like you, creditors want to be treated equally and fairly.
Creditors do not want to learn that you are working on a debt management plan with another creditor and not doing the same with them.