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Debt settlement vs debt management - Which is the right choice?



Are your monthly debt payments getting out of control? Do creditors harass you with threatening phone calls and letters? If so, then it's time you start to work your way out of the crisis. This can be done either by reducing your debt amount or restructuring your monthly payments. That is, you need to negotiate a debt settlement or debt management plan with your creditors or collection agencies.

How to choose between settlement and debt management

If you're thinking how to decide upon debt settlement vs debt management, try analyzing your financial situation. You may even take help of a debt relief company and attend a free counseling session with their consultant.


The consultant will take into account your current income, liabilities, and debt payments and make an assessment of your financial situation. Based on your financial situation, the consultant will assist you in comparing debt settlement vs debt management so as to help you take the right decision.

How settlement and debt management plans work for you

While the consultant at the debt relief company helps you to decide between debt settlement vs debt management, you need to get an idea about how each option works.


  • Debt settlement: It's a way that helps you to reduce your outstanding debt balance by 40-60% of what you're supposed to pay back. With settlement, you get the chance to get out of debt without even filing a bankruptcy. You'll also be able to stop harassing calls from creditors or collection agencies.

  • Debt management: Such a plan is usually offered when simple budgeting tips don't seem enough to help you pay off your dues. In such a case, what you need is negotiation with creditors to reduce the interest rates and late fees on your bills. Here's when a debt management plan (DMP) can help you get over your financial problems.

When to go for settlement and debt management plans

Usually, if you have a stable income source to help you carry out your monthly debt payments, a debt management plan is what you should choose. Using a DMP, you can take advantage of reduced interest rates and avoid paying late fees and extra charges. However, if you can't afford to make monthly payments even at reduced rates, going for settlement would make sense.


Both settlement and debt management can help you out of debt problems and make your life stress-free. But you need to understand which option suits your situation. Only then you can utilize the benefits of the option and make it work in your favor.



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Send message to jmagee8871
Sub: #1 Debt Management vs Debt Settlement
Replied on 01-16-2009, 11:32 AM
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I am starting on the journey of owning up to my debts and getting a plan going to get them paid back. I have contacted a debt management company in an effort to pay everyone back.
I am currently 4-6 months behind on all the credit cards.

My question is whether I should go with debt settlement on my own. If I am this far behind on my cards is it going to hurt credit score to do debt settlement anymore than I already have by not paying for so long?

Any thoughts/ideas would be greatly appreciated.

Anonymous
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Sub: #2
Replied on 01-16-2009, 02:45 PM
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If you can afford a debt settlement program i would go into a program because after your accts get settled your creditors have to report to 3 credit bureaus and your credit score begins to increase.

Anonymous
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Sub: #3
Replied on 01-16-2009, 02:49 PM
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You'll recieve more marks on your credit (charged-off, collections, settled, etc), but at this point my concern would be ridding yourself of your debt completely. Credit can be repaired. As far as settling check out both options of settling on your own and contacting a companies.


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Send message to phoenix
Sub: #4
Replied on 01-17-2009, 03:18 AM
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There are many debt solutions available in the market. Which one you'll choose depends upon your current financial situation.
You may go through the following page for a comparative study on different debt solutions available to you: -
Debt Solutions - 3 steps and 5 ways to do it

Let me give you a overview: -
Debt Management Program involves a credit counseling session, budgeting, consolidation of multiple debts and debt negotiation by your debt management company to lower your apr and wavering late payment penalties. dmp has positive effects on your credit score.

Debt Settlement - It can reduce your debt by 40 to 60%. But will adversely affect your credit score significantly.

If I were you then I would have tried for Do it yourself Debt consolidation, Settlement and Debt Management

Anonymous
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Sub: #5
Replied on 07-26-2009, 08:17 PM
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I have gone through a debt management program and they have been great! Money Management International. I have been in the program almost 2 years and should be out of debt shortly. My credit score has gone down, but not to the point it is unrecoverable. There was one month that I was having a hard time coming up with the money, and they told me I have done real well and to contact my creditors. Contacted my creditors and they were very responsive -- as long as I remained in the program and tried to make up the payment within the next few months. They make you responsible for keeping in touch with your creditors, which I feel makes people more responsible. They also keep in touch with the creditors. I have a friend who chose Palmer, a debt negotiator. They charge $65.00 a month as a monthly service fee, then a certain % which is collected up front before they even contact your creditors, then 33 1/3 % of what they save you, then you have to add what amounts the creditors write off as income when you file your taxes. They also do not keep in touch with your creditors. Most of his creditors had already charged off his accounts before he discovered what a SCAM. They also tell you not to talk to your creditors. Probably because your creditors will tell you the have been reported to bbb so many times, they can paper their walls. Good Luck with what ever you decide.

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Send message to krisorns
Sub: #6
Replied on 08-17-2009, 07:43 PM
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My wife and I are looking at all options, DMPs vs Debt settlement companies......wow.....don't know which way would be better. The only thing that I can say is that I haven't read as much negative stuff about DMPs as I have debt settlement companies.

Sub: #7
Replied on 08-17-2009, 08:32 PM
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If you choose debt management, make sure that the company is a non profit 501c3 agency. They are the ones that can work with the creditors best. I looked at one a year ago that offered to raise all of my payments and interest rates for me, and said that was the best they could do.

Gerry L.
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Sub: #8
Replied on 09-24-2009, 04:08 PM
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I used debtfreeleague.com and they helped me a lot. No kidding. I had 19K in debt and paid at the end of 29 months or so, around 8k-9K
I was receiving collection calls but suddenly stopped. SOmething i liked is that they reached their first settlement on the 6th month. I am telling you this, because my father in law was with another company, i think debt free america or something like that, and they said that they will reach their first settlement after they have collected all their fees. well that is my experience. good luck.

L Waters
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Sub: #9
Replied on 09-27-2009, 01:56 AM
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Check out this debt settlement program. They offer a free consultation.

Anxious in AL
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Sub: #10
Replied on 10-01-2009, 12:03 AM
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Hi I am a prospective medical school student who needs a 675 credit score to keep my loans. I am in over my head in debt about 24k mostly due to preparation for medical school. I am currently unemployed and have not missed a payment when I was working. But with no job I know it is a matter of time before I am late. So, I would haveto do debt settlement but I do not know who to start with.

Does anyone know of a good company in AL that will not demolish my credit score.

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Sub: #11
Replied on 10-01-2009, 12:17 AM
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Hello Anxious, it doesn't have as much to do with the company as it does with the concept of debt settlement itself. There is no way to settle your debt and keep a 675 credit score during the process. If you had a job and the monthly cash flow to repay the debt I would suggest looking into a DMP but it doesn't sound like that will work for you. However you cannot settle your debt and not take a hit to your credit.

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Sub: #12
Replied on 11-04-2009, 05:39 AM
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Collection agencies will settle and they don't charge you anything!

Marie Theresa
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Sub: #13
Replied on 11-17-2009, 04:41 PM
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I currently am working with a Debt Settlement Company- my brother and I and it seems like they are taking my money out of my account to help settle his first. I keep paying a monthly fee to them and nothing is done on my behalf. Why am I paying a monthly fee if they are not working on my accounts yet?
I have an appt with a very reputable Credit Counseling Company approved by BBB at end of month. I think this is the way to go for my brother and I.



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Send message to love_my_things
Sub: #14
Replied on 11-18-2009, 03:52 AM
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theresa, how long have you been in the program? are you sure you know how settlement works? are you positive that they are not doing anything on your behalf let us know the answers to these questions. and alot of times once you are to far late the counseling companies wont take you anylonger.


Luisito
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Sub: #15
Replied on 11-24-2009, 10:02 AM
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right after the 10th month of being in a debt settlement program i was about to cancel with them. I have to say that i was kind of dissapointed or if i was ripped off. Suddenly a call and bam the first settlement, i could not believe it because was a 67% savings, i thought they were kidding, they sent me the settlement letter and i called the creditor myself to confirm, it was true. Then after 4 months, i was feeliing dissapointed again, and two settlemens (small accounts but two settlements though) they were around 52% give or take. Yes my fico was not that good thanks to the collections, but at the end of my 7 accounts i did not have any debt. That is what i needed, not keep my fico. I was with debt free league. a good company, well I think so.

Sub: #16 nonprofit or not, isnt necessarily better.
Replied on 11-30-2009, 11:41 PM
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Quote:
Originally Posted by southernapostolic View Post
If you choose debt management, make sure that the company is a non profit 501c3 agency. They are the ones that can work with the creditors best. I looked at one a year ago that offered to raise all of my payments and interest rates for me, and said that was the best they could do.
That is not necessarily true actually. One of the largest debt management companies is a for profit and has interest rates as low as 0%, . It depends upon the relationship they have with the company from what I have observed.

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* Disclosures:
  • By signing up for counseling session, your provided details (Name, Email ID and Phone No.) will be forwarded to the company advertising on the DebtCC. However, you have no obligation to use their services.
  • Some creditors and collection agencies refuse to lower the pay off amount, interest rate, and fees owed by the consumer.
  • Creditors/collection agencies can make collection calls and file lawsuits against the consumers represented by the debt relief companies.
  • Debt relief services may have a negative impact on the consumer's creditworthiness and his overall debt amount may increase due to the accumulation of extra fees.
  • The amount which the consumer saves with the use of debt relief services can be regarded as taxable income.
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