Debt Management Plan
A debt management plan is one way for those in tough financial times to take control of their situation. In other words, bankruptcy is just one option for those who are dealing with a difficult financial situation or feel overwhelmed by the amount of debt that they are dealing with. A careful, sensible plan to manage that debt could be a viable alternative.
A debt management plan is an arrangement that you come to with the entities that you owe money to, in order to pay down outstanding debts. It's a similar process to Chapter 13 bankruptcy, except that debt management is done through a credit counseling agency instead of through the bankruptcy courts and an assigned court trustee.
If you would like to explore whether a debt management plan or bankruptcy may be right for you, ask a local bankruptcy attorney. To get in touch with a sponsoring bankruptcy attorney, simply fill out our free case evaluation form below.
The Difference Between a Debt Management Plan and Bankruptcy
There are a number of concerns to keep in mind when deciding whether to set up a debt management plan or to file for Chapter 13 bankruptcy. Though they are similar processes, there are some important differences, generally speaking.
In a Chapter 13 bankruptcy repayment plan, you may not be called upon to repay all of the debt that you have accumulated. This is not the case in a debt management plan. In a debt management plan, you will need to pay back all of your debt, and you may be asked to take on no additional credit for the duration of the plan.
Instead of working with a bankruptcy court and trustee, you'll work with a credit counseling agency. The credit counselor may be able to negotiate a drop in interest rates and waiving certain fees, but you will want to make sure with creditors that a counselor can back any claims like this that it makes.
Similarities Between Debt Management and Chapter 13 Bankruptcy
Like a Chapter 13 bankruptcy, a debt management plan will typically feature a schedule of regular payments to creditors in a way that is manageable. The timeline for each is similar, over a course of several years. In each process, these payments will go through someone positioned between you and your creditors.
Debt management and Chapter 13 will each show up on your credit report, and they are each taken seriously by lenders.
If you are considering various ways to confront your debt situation, one of our sponsoring bankruptcy attorneys may be able to help, and to provide advice about how various plans might fit your situation. To get in touch with a local bankruptcy lawyer, please fill out the form below. A lawyer can provide a free case evaluation, and could be the resource that you are searching for.