With so many people falling into the debt trap over the last five years, it's no wonder that the number of companies offering debt management services has increased to meet the demand. When it comes to serious debt problems, too many people think it's best to stick their head in the sand and ignore it – however, the only way to deal with such issues is to face them head on and be proactive in sorting them out. Who you approach for help, however, really depends on how mentally strong you are …
We say that because there are essentially two ways of handling debt management: either either do it yourself or you get someone to act on your behalf. Not surprisingly, it's the first option that requires the most confidence since you'll effectively be contacting all the people you owe money to (your creditors) and proving to them that you can not actually afford to pay them what you owe every month. Of course, the idea of approaching creditors and talking them into accepting less money is something that most people find incredibly intimidating, which is where the mental strength come in – if you think you can handle dealing with them directly though, then it's a good idea to go to your local Citizens Advice Bureau and having them assist in drawing up a debt management plan for you. This will take your income and 'essential' expenses like food, rent and petrol into account, then work out how much you actually can afford to pay to your various creditors. It's this information that you then approach your creditors with and so the process goes on from there.
As you might expect though, getting the ball rolling on a debt management plan alone takes a huge amount of effort and potential stress – that's why many people choose to turn to a company offering debt management services instead. Given that it's a service, there's naturally a fee attached to the work a debt management company will do, but if you can find one that will handle pretty much every aspect of the process for you (from working out the calculations and contacting your creditors about the arrangements to even handling the monthly payments on your behalf) then often the fee can be worth it. Whatever you do though, do not pay up-front just for advice … you're looking for a complete service, not just someone to tell you what to do!
However you handle it though, there's no denying that making use of debt management services in your hour of need is a good idea when trying to get your finances back on an even keel. There's no shame in asking for help … in fact, there's more shame in covering your ears and hopping it all goes away! Just remember that when entering into a debt management plan, you're making a legal commitment to pay off your debts – if you let the payments slip, then you could end up in court for the total amount owed to ALL your creditors and that would have a catastrophic effect on your credit record …
Debt management services …
- They are a great solution for people in serious debt trouble looking for a way out
- Can be offered either by charitable organizations or various debt management companies
- Should be compared before using to ensure you're getting a complete package of help
- Are legally binding and must be adhered to in order to keep your creditors at bay
Copyright: Individual Finance, 2010.