Debt solution programs are informal agreements designed to deal with serious debt problems. They are provided by specialist debt companies and come in two main forms. The first is known as debt management or debt consolidation and the second type is called debt settlement or negotiation. When it comes to finding the best debt solution program for your particular circumstances, you first need to have an understanding of how they work. I will explain a bit about the situations that each of the programs are designed for, and then let you know how to go about finding the most reputable and reliable companies to help you.
Organisations specialising in Debt management will provide what are known as debt management plans, which are one of the most common forms of debt solution programs. The process involves consolidating all your debts into one single payment that you make to the company, but this does not involve taking out any new loans to pay off the old debts. What happens is that the company negotiate with your creditors to reach new arrangements for paying back what you owe them. This tends to include waiving or reducing interest charges and the repayment amounts, which makes it affordable for you to repay the amount owed.
The main advantage of this process is that instead of lots of payments that total more than you can afford, you only have one payment to worry about, and this is within your means to pay. As well as being much simpler for you to deal with, it has the added advantage of your creditors having to deal with the debt management company rather than you, so you should no longer be pursued for unpaid bills. To be eligible for these debt solution programs you must need to have a steady income that leaves you some surplus income each month that you use to meet the monthly payments. You should also have a substantial amount of debt to at least two or three different creditors.
The other main type of debt solution program is debt settlement, which is different to the previous process in that it involves an actual reduction in the amount of your debts. Whereas under debt management you repay your debts in full, just under different terms, with debt settlement you will only pay back a proportion of the debt. The company you use for the program will appoint an expert debt negotiator, who will negotiate with all of your creditors to arrange settlements of your debts for a reduced amount. This normally involves agreeing to write off anywhere from 40% to 60% of the debt in exchange for an up front payment of the balance.
While the negotiator is trying to reach settlements, which can take anything from a few days up to two years or more, you will stop paying your creditors and put a regular amount of money instead into a new account. This money gradually builds up and is used towards the settlements as each agreement is made. The settlement company should inform your creditors about the debt program and they ought to stop bothering you and deal with the company instead. Debt settlement is for dealing with very serious financial situations, usually where people cannot afford the payments on a debt management plan.
Debt settlement is very common in the US, but the UK has an alternative called an IVA, which achieves the same result of a single payment and a portion of your debts written off. Once you have an idea of which type of debt solution program might be more appropriate for you, the next important job is to identify some specialist companies to approach to see if they can help. You do need to be careful in doing this as there are unfortunately some organisations that will not give you honest advice, and who will try to take money from you up front and not achieve the results they promise. You do not need to let this put you off, as it is easy to avoid such companies.
The safest starting point is to follow recommendations for well established and reputable debt companies, which have a proven track record of success in helping people out of debt. You should also make sure you apply to at least two or three so that you can make a comparison between what they propose.
