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Debt settlement vs debt management - Guide to choose the right option

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.

I am starting on the journey of owning up to my de...
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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.




I owe line of credit 68K and I was out of country for 8 months, last four months I have not paid a dime because all the money I left in my account was gone already towards payment. Now I am out of Job and no money coming in. How can I deal with this situation? What if I don't pay them at all what will be the worst case scenerio we are talking about?

Sub: #1 posted on Wed, 11/03/2010 - 15:27

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Quote:
Originally Posted byGreg Bartlett
Settling debt probably won't hurt your credit score but those late payments will probably stay on your credit report for 7 years. You may even owe the IRS money on forgiven debt.


The rule is, you may have to pay tax on any forgiven amount greater than $600 dollars. However , there is a IRS form 982 that you can get to explain why you were in a program which may exempt you from having to pay back the forgiven amount

Sub: #2 posted on Fri, 08/20/2010 - 04:10

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Quote:
Originally Posted byjmagee8871
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.


If you are already 4 months behind, your score is already hurt. The question you should ask yourself, how long do you want to stay in debt. Debt settlement is a shorter process and allows your credit to be hurt for a short time. You can rebuild your score after your debt are paid.

Sub: #3 posted on Fri, 08/20/2010 - 04:03

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Hello, I am currently enrolled with Debt Free Associates, CA. They will soon be trying to take my 3rd payment. I freaked out tonight because every dollar I have put in they have deducted as Customer fees as of today's statement. I have a large amount debt and now have given them $2163.82. I am approx 2 months late on multiple cards with large balances. I am overwhelmed with all of the info on this forum. I have this awful feeling I am being scammed. My thought tonight is to cancel with DFA and take the $982 per month and sock it away to settle one account at a time. Does this make sense? I really appreciate your help. Thank you!

Sub: #4 posted on Tue, 07/20/2010 - 07:40

Unregistered


Quote:
Originally Posted byjmagee8871
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.


Settling debt probably won't hurt your credit score but those late payments will probably stay on your credit report for 7 years. You may even owe the IRS money on forgiven debt.

Sub: #5 posted on Wed, 07/14/2010 - 00:25

Greg Bartlett Greg Bartlett

(Posts: 6 | Credits: 3.63)

@topic, people, it all depends on your current 'financial situation'. Both has there own Pros and Cons. For DMP, by the end of your program, you will be debt free but probably paid more than 120% your current balance but still have your credit scores intact. Whereas, for DS, by the end of your program, you will be debt free but would've paid as much as 80% max of your current balance but with damage on your credit scores. The question is, what is your priority? Debt free in a couple of months with more extra cash? or stale credit scores with debts to extend for years to come?

Sub: #6 posted on Mon, 05/24/2010 - 19:57

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luisito...debt settlement was really unbelieveable...but you should trust the company..im working with a debt settlement company...

Sub: #7 posted on Mon, 05/24/2010 - 19:42

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I posted this answer earlier and for some reason it has not shown up. It is quite simple and I have been doing this as an OWNER and APPROVED debt management source for 12 years. Quite Simply, THERE IS NO DEBT MANAGEMENT COMPANY IN THE WORLD THAT CAN GET YOU 0% on ALL ACCOUNTS, each creditor has different terms. All minimum payment requirements and interest rate reductions are PREDETERMINED and NON NEGOTIABLE - AND THEY DO NOT VARY BETWEEN DEBT MANAGEMENT AGENCIES. And please DO NOT confuse DEBT MANAGEMENT with DEBT SETTLEMENT which is nothing but a COMPLETE SCAM. Debt Management clients PAY ACCOUNTS IN FULL and the rates that are offered are predetermined and NON NEGOTIABLE. We will ONCE AGAIN give examples here. There are 2 creditors that grant 0% interest in the DMP, they are Target and Advanta. So with this in mind we will create a scenario where a hypothetical debt management client has $10,000 on Advanta, $10,000 on Target, $10,000 on Chase and $10,000 on Capital One. Advanta requires 2.5% of the balance or $250 per month and grants 0% interest, Target requires 2.5% of the balance on $10,000 or $250 per month and grants 0% interest, Capital One requires 2% of the balance or $200 per month on $10,000 and grants 7.4% and Chase requires 2% of the balance or $200 per month on $10,000 and grants 6% interest. THAT'S THE WAY IT IS PERIOD ! and it would not matter which agency, which by the way had to be APPROVED with these creditors that submitted the proposals. Before these "Debt Settlement" SCAMS started popping up all over the country all we had to deal with was bad debt management companies that just didn't get the job done. Well, now we have SETTLEMENT SCAMS everywhere and the CONFUSION for the public is now even more complicated. The bottom line is this and I will use Advanta that offers 0% and Chase that 0ffers 6% as an example. If a hypothetical client enrolled in a debt management program with $10,000 on Advanta and $10,000 on Chase the required payment on Chase for $10,000 would be $200 and they would be granted a debt management interest rate of 6 % and if they included the Advanta account for $10,000 it would require $250 per month and they would be granted 0%. We could take 100 of these HYPOTHETICAL clients with all of the same balances and interest rates WITH THE SAME CREDITORS and have PROPOSALS submitted on their behalf by 100 SEPARATE agencies for each one SEPARATELY and the minimum payment requirements and interest rate reductions would ALL BE THE SAME PERIOD ! And it has ALWAYS been that way. The name of my company is

OUR RECORD SPEAKS FOR ITSELF, if what I was saying was not TRUE I would have a MYRIAD of complaints against my company. I HAVE ZERO !! When you explore "Debt Settlement" offers look up their BBB Ratings and you will often find "F" ratings. Just remember, "if it sounds too goo to be true it probably is".

Once again as I explained in an earlier response today, THERE ARE NO NEGOTIATIONS IN "LEGITIMATE" DEBT MANAGEMENT PROGRAMS. All requirements in relation to minimum payments and interest reductions are PREDETERMINED and updated to "US LEGITIMATE" agencies regularly and do not vary between agencies, In other words and I will use Chase as an example again, if you owe Chase an even $10,000 they require 2% of the balance or $200 per month and they will give you 6% interest PLAIN AND SIMPLE. So the person that responded to an earlier post of mine stating that "some "For Profits" get 0%" doesn't know what the HELL he or she is talking about. For a list of what creditors offer in LEGITIMATE debt management programs refer to my web site at


GO BACK TO MY PREVIOUS POST ABOUT MASTERCARD RPPS AND HOW IT IS ALL DONE ELECTRONICALLY NOW AND THEN CALL US WITH YOUR QUESTIONS

I can provide DOCUMENTED PROOF from creditors such as Chase that I am an approved source with them and I can will verify that what I have been writing here is TRUTH. Bank of America, HSBC, Discover and Citibank would be happy to verify what I am saying here is true too. So if any of you "experts" out there want to dispute what I am saying, feel free to contact me at because I can document and VERIFY EVERYTHING I have said here,

Jim Young

(Link Removed by Shazzers as solicitations are against TOS rules)
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Sub: #8 posted on Fri, 05/07/2010 - 05:54

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"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".

Different creditors offer different rates. Target and Advanta offer 0% where Chase offers 6% and HSBC offers 9%. In a debt management program you don't end up with one interest rate for all of your accounts. Each creditor offers a rate that is predetermined and they change from time to time. For example, last year Capital One offered 15.9% and now they have dropped to 7.4%. I would know because I have been doing this for 12 years and THERE IS NO DEBT MANAGEMENT COMPANY IN EXISTENCE THAT CAN GET YOU ZERO PERCENT ON MULTIPLE ACCOUNTS and that is just the way it is. If you only had a Target account and an Advanta account which both offer 0% then you would be at 0% for your whole debt load but if you had Advanta, Target and Chase you would have 2 accounts at 0% which would be the Target and Advanta and the Chase would be at 6% at 6% PERIOD ! THOSE ARE THE FACTS !

Sub: #9 posted on Fri, 05/07/2010 - 02:10

Unregistered


Forum Participants,

What everyone needs to understand about LEGITIMATE debt management programs is that there are NO VARIATIONS between the minimum payment requirements and interest reductions between companies. In other words one "LEGITIMATE" debt management company can't get you a different interest rate and minimum payment than another one whether for profit or non profit. I have owned and operated Accelerated Debt Consolidation, Inc. in Boca Raton, Florida for the last 9 years and I will explain here how proposals are processed. We will use Chase and Capital One for examples here. Both Chase and Capital One require 2% of the balance in the debt management program, Chase offers 6% interest and Capital One offers 7.4% interest. Companies like Chase and Cap One receive THOUSANDS of debt management proposals every day from debt management agencies across the country and there is no way they could individually "negotiate" each minimum payment or interest reduction. Proposals and payments are submitted electronically through Mastercard RPPS which is an electronic system for processing debt management proposals and payments. Each week agencies like ours and other "Legitimate" agencies receive what are called "Biller Directories" from Mastercard RPPS. These Biller Directories contain the participating creditors "Biller I.D.'s" for both payments and proposals. So it is quite simple, if a consumer owed Chase an exact $10,000 and Capital One an exact $10,000 both creditors would require $200 per month or 2% of the balance through the program and Capital One would give the consumer 7.4% and Chase would give them 6% it's that simple and it would not matter what agency the proposal was coming from or whether they were non profit or not. The agancy submitting the proposal has to be an approved source with the various major creditors and some like Chase, Citibank and Bank of America assign us code numbers. Remember AMERIDEBT ? they were one of the biggest SCAMS in the debt management industry and they were NON PROFIT so NON PROFIT is meaningless. If a proposal was submitted to Chase or Capital One on a balance of an even $10,000 for $199 it would be rejected on the electronic return file the next day and it would say "increased payment required $200" it's that simple because the proposed payment was $1 short of the creditors requirement. If the proposal for a $10000 account was being submitted to Target Visa for example it would have to for $250 because they require 2.5% of the balance and they offer 0%. Now on the subject of Settlement see our CAUTION page at
because you NEVER have to pay a settlement company to destroy your credit, you can do that for yourself for free. You can also review our BBB Report at

There is so much erroneous information out there even on national news shows that it is just incredible so be careful and check with the BBB before making a decision involving how to handle your debt problems or just call us at because our record speaks for itself.

Jim Young

(Link Removed by Shazzers as solicitations are against TOS rules)
Link removed. Please read TERMS OF SERVICE for a more detailed description regarding advertising. Shazzers

Sub: #10 posted on Thu, 05/06/2010 - 23:49

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