|Posted on June 2, 2011 at 1:30 PM|
There are many standard financial definitions for debt management. Debt management consists of involving a third party person to help the debtor repay his or her credit. There are many companies that offer professional debt management plans in order to help people with damaged credit and/or heavy debt to repay their loans.
Debt management groups are usually companies who also specialize in credit counseling. These companies can offer high quality debt management plans to help customers get their financial situations under control. What debt management basically means is spending less than you make. However, taking into consideration all financial intents and purposes, debt management is in fact a well-structured debt repayment plan established by a designated third party. A person can request the services of a debt management company either as a result of personal intention or court order.
All debt management plans entail a series of carefully thought through steps. These steps are to be established by the third party, with help from the debtor. The first step of creating a debt management plan is usually to compile a list of all the creditors and the exact amounts the debtor owns to each of them. Not all creditors are eligible for inclusion in debt management plans. For example, home loans and car loans, which are secured debts, cannot be included into a debt management plan. However, many creditors can be included in debt management plans, as in most cases, this suits the creditor's best interest, as a debt management plan will give the debtor the possibility to repay his debts.
After the third party person and the debtor have successfully compiled the full list of creditors and exact amounts owed by the debtor, they must calculate the total amount of expenses for the debtor. This total amount generally includes all types of expenses, including rent payments or mortgage payments, living expenses, as well as other expenses. Then, the third party person and the debtor must calculate the maximum amount of money that can be allocated for the debt repayment plan. In most cases, a third party person or service will try to settle some debt amounts and lower or avoid practicing any interest during the period in which the debt is being repaid.
A debtor whose total debt value is below 10,000 USD may not qualify for third party services and debt management plans. It is important for both debtors and third party persons or services to understand that using debt management plans will impact the debtor's credit score hence, many available credits will be out of reach for some time. Also, there is a small fee to be paid when establishing a debt management plan.
In essence, a debt management plan may help a debtor with the repayment of his debts. All persons who are more than $10,000 in debt may qualify for third party help with their debt. A debt management plan is designed to help debtors get their financial situations under control and most of the time it manages to meet its purpose.