Debt Management

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Whether done on your own or through a third-party constituent, debt management is the process through which a debtor works to repay their pending debts. When done through a company, de

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Debt Reduction
Debt Reduction
Bill Consolidation
Bankruptcy
Credit Counseling

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Debt Management
Whether done on your own or through a third-party constituent, debt management is the process through which a debtor works to repay their pending debts. When done through a company, debt management often involves negotiations directly with your creditors in the attempt to lower payments and/or interest rates. There are many paths to debt management, several of which are listed below.
Debt Reduction
Debt reduction is a process selected entirely by the debtor. While they may seek the consultation or assistance of a debt company, there are many ways in which individuals can reduce their own debt. For instance, specific strategic payment plans, like the debt-snowball method, can help a debtor come closer to achieving financial security. Debt settlement is another common option, in which a debtor communicates directly with their creditors to come to some sort of account-closing agreement in exchange for payment. Debt management plans (DMPs) are also popular, although they require the assistance of an outside source.
Debt Consolidation
In order to lower monthly payments and often receive lower interest rates, debtors can opt to consolidate their debt. In doing so, the debtor takes out either a secured (collateral-based) or unsecured (higher interest rate) consolidation loan, which immediately pays off creditors and allows the debtor to focus on paying off one loan, rather than several. Debt consolidators often work on the debtors behalf to negotiate lower balances and save the debtor money. However, many debt consolidators charge consultation and account management fees. In addition, interest accrued over a longer period of time often results in the debtor paying more money in the long run than originally owed. Still, this can prevent debtors from having to declare bankruptcy.
Bill Consolidation
Two difference processes are available when dealing with bill consolidation. First, there are bill consolidation programs, which involve credit counseling and negotiations, much like a debt management plan. Second, there are bill consolidation loans, which act much like debt consolidation loans but can include balances like medical bills and utilities, in addition to typical unsecured credit lines. Either way, bill consolidation consultants aim to help the debtor pay off their balances and move steadily toward debt reduction.
Bankruptcy
When a debtor files for bankruptcy, they legally declare that they are unable to pay off their creditors. The two most common bankruptcy filings are Chapter 7 and Chapter 13. Chapter 7 involves the liquidation of a filers assets, the profits of which are put toward paying off the filers creditors. To quality for Chapter 7, filers must pass a means test to determine financial eligibility, and they must also declare all assets before a court. Chapter 13 is more typical of filers with a regular income that provides the ability to pay their debt over time. The filers financial reorganization is supervised by a federal bankruptcy court, which temporarily bars creditors from harassing filers and creates a three- to five-year repayment plan.
Credit Counseling
To determine the best way of handling debt, credit counselors meet with debtors to negotiate some sort of repayment plan or debt management plan. Under a DMP, credit counselors will work directly with the debtors creditors to negotiate lower payments, fees and interest rates, allowing the debtor to pay off their balances and stay on top of their finances. Certain debt, such as rent, utilities and mortgages, are considered secured debt, and are not eligible for negotiation under a DMP. However, unsecured debt like personal loans, credit cards and bank overdrafts are eligible. While some credit counselors will charge fees, others do not.
Budgeting
For a more in-house debt management technique, individual or company debtors can use budgeting to itemize and control their debt. Budgeting mainly involves the debtors keeping track of their own spending, noting where the money is going in order to better strategize how to save. For debtors unsure of how to budget on their own, accountants are very popular when budgeting is involved. They can take all a debtors spending statements and financial records to help organize their financial records. At that point, they can professionally determine how best to save the debtor money. Whether on ones own or through an accountant, budgeting is a long-term process that requires patience and common sense.

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