Debt Management Programs
Debt management programs help consumers better control and pay off debt. A company providing debt management service makes payments to your creditors on your behalf. Make sure you have thoroughly investigated your options and the company you are considering. The Federal Trade Commission and some local state attorneys general report that some companies which purport to be debt-counseling firms deceive customers by providing inaccurate information about their costs and benefits. Some companies falsely claim they are nonprofits.
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Company Selection
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The Federal Trade Commission recommends that you ask the debt management company you are considering how long it has been in business. Contact your Better Business Bureau, local chamber of commerce and state attorney general to find out if any complaints have been lodged against it. Search the Internet for consumer complaints. Make sure the company has a license to offer its services in your state.
Ask about the services the company provides; a more comprehensive firm can better address all of your debt issues. For example, find out if it provides financial planning and budgeting counseling.
Be careful about companies that tell you that a debt management program is the only solution to your problem. There are other options such as dealing with each of your creditors yourself.
Make sure you get everything in writing before signing up with the company.
Review
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Periodically check your credit report for late payments because some debt management companies use a debtor's money to earn interest before paying the creditors. Even worse, some unscrupulous companies keep the money and never pay the creditors.
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Requirements
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Realize that using a debt management firm does not relieve you of your debt responsibilities. You must make regular timely payments because the firm has committed to paying your creditors for you. Look at your finances and assess whether you can make the monthly payments because the program will not work if you consistently miss payments. If for some reasons you can't make a required monthly payment, make sure you notify the debt management company.
Problems
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If the firm you are doing business with runs into financial difficulty and goes out of business, take immediate action. Cancel any payments to preserve your funds. Contact your creditors, make them aware of the situation and make payments to them directly.
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