Should I File a Debt Management Plan?

Debt Management
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Why a Debt Management Plan may be the perfect solution for your debt problems


A debt management plan is a payment plan, negotiated by a credit counselor on your behalf, to repay your debts.

Here's an example:

Let's assume you owe $30,000 on six different credit cards. Each of the six credit cards has six different payment due dates, so you are finding it hard to make all of your payments each month on time.

In addition, the interest rates on your credit cards are very high, so each month most of your payment goes towards the interest only; you are not repaying much of the principal.

It's frustrating, because you have a good job and a good income, but you can't seem to get ahead. You do well for a month or two, and then unexpected car repairs or family expenses put you behind again.

What can you do?

You could file a debt management plan. Here's how it works:

A credit counselor will help you make a list of your debts, and they will work with you to create a monthly budget. With this information they will determine a repayment plan.

In our example above, your total debts were $30,000, so they may work out a repayment plan where you pay $1,000 per month for 30 months.

In many cases the credit card companies will be willing to reduce or eliminate the interest they are charging, so all of your payments go towards reducing your debts.

Even better, in a lot of cases the credit card companies actually pay the fees of the debt management company, so all you pay is the payment towards your debt, which is why a debt management plan may be the perfect solution for you.

Contact a credit counsellor today to determine if a debt management plan is right for you.

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