Finding the best debt program can be quite a complex process, as it partly depends on your particular situation, as well as where you live. The best debt program for one person may not be the best debt program for someone else. In this article I will try to explain how debt programs work and help you understand which type of program will be most appropriate for you. I will then explain what you can do to narrow down your search for a good company to work with, and how to ensure that you get the best value program available.
In broad terms, there are two main types of debt program available. The most common option for dealing with fairly large amounts of unsecured debt is a debt management plan. These are known by various other names and the process is also known as consolidating your debts. For more serious situations there is a completely different option which is known as debt settlement or debt negotiation. The only variation on this is that for UK residents, there is a scheme called an Individual Voluntary Arrangement, which achieves the same result for UK residents as debt settlement does for US residents.
A debt management plan is likely to be the best debt program for you if you have a fairly large amount of unsecured debt and a steady income that leaves you some money spare each month to put towards your debts. You will need to approach a debt management company, who will go through your financial situation with your to see whether or not this type of debt program is likely to work for you. If you do go ahead, they will then contact everyone you owe money to, in order to negotiate new arrangements for paying back your debt.
The end result of such negotiation should be that new arrangements are put in place, which make it more affordable for you to repay the debt. When this is done for all your creditors, all future payments are made by the debt company, so you just have to make one single payment to them each month. They then have to share the money out among your creditors, and any queries or problems the creditors have will be dealt with by the company.
As mentioned earlier, debt management plans are only possible if you can afford to make and keep up with the regular monthly payments required. If your income and debts are such that you could not manage this, that is when you would need to consider debt settlement, or for UK residents, an IVA. The difference between these and a debt management plan is that they are a more radical approach, which usually depends on actually writing off at least half of the debt.
Debt settlement is only appropriate for people who are in a serious situation and really struggling to keep up with payments. Many people who are considering bankruptcy turn to debt settlement as a less drastic alternative. The process depends on a skilled negotiator getting agreement from your creditors to write off a large portion of your debts, often well over half of the original debt. Creditors are unlikely to agree to this if they have reason to think that you could actually afford to repay more than that, but if they think the alternative may be to get nothing at all, they are more likely to agree. This is why it is only suitable for genuinely serious situations.
If you join this type of debt program you will stop making any payments to your creditors and start putting money away into a holding account instead. You keep doing this while the negotiators are working at your creditors, which can take anything from a few weeks up to three years. Your money builds up and can be used to pay off each creditor when a settlement agreement is reached.
If you think that either a debt management plan or debt settlement could be the best debt program for you, the first step is to find a reliable and trustworthy company to work on your behalf. Choosing a debt company is no different to making any other kind of purchase, in that you can only be sure you are getting good value if you shop around. The best companies all have simple online forms to get started and you are not committing to anything by applying. You should therefore apply to a few and see who makes the best proposal. You can easily avoid disreputable companies by following recommendations and reviews for trusted and well established organisations.
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