Debt Management Agencies Can Provide Help |
By David Pilley on August 16, 2010
.jpg.aspx?width=75&height=75) At some point in your life, you might need financial help. Your debt has grown so high that your creditors are on the verge of taking legal action, and you might be threatened with wage garnishments or even home foreclosure. You might not be able to make the phone calls to explain your circumstances and negotiate a feasible payment plan. This is where a debt management agency can come into play.
If you inquire the help of a debt management agency, the agency will act as a mediator between you and your creditors. An agency will take a look at your current situation and negotiate with creditors to reduce the interest rates and late fees on your accounts. The agency will give you budgeting tips, and, if you ask for one, it may also create a debt management plan, making it possible for you to pay off your debts while preventing possible garnishments or property seizures.
Under a debt management plan, you will make a specific monthly payment to the agency, who will then disburse payments to your creditors. A management plan is usually structured to last between three and five years, and getting help from a debt management agency will not typically hurt your credit score too much.
There are some factors you need to consider if you are thinking about getting help from an agency. First, you should look for a not-for-profit agency. For-profit agencies will charge high upfront and/or monthly fees to use their services. If you don’t want to pay more than you already have to, seeking a not-for-profit debt management agency is a must.
Next, you should do business with an agency in person. Debt management agencies will ask you for personal information, such as your Social Security number and your bank account numbers. Giving this information online may lead to theft, and you could end up being scammed for a large amount of money. You also don’t want to give out your bank account information over the phone because your bank accounts may end up being drained by automatic payments. To make sure your money is safe, do business in person. Supply a copy of a voided check, and don’t resort to an automatic online payment plan.
One more piece of information when dealing with a debt management agency involves your credit accounts. If you resort to a debt management plan, all of your credit accounts must be closed. If you can’t make the monthly payments, your accounts will be restored, but with the original high interest rates and fees.
Take this information into account when deciding if you need the help of a third-party agency. If you do decide to get help, a kind of postscript to consider is waiting until Halloween. The Federal Trade Commission has recently issued amendments to the Telemarketing Sales Rule, including one called the Advanced Fee Ban. This addendum will prohibit debt-relief companies from charging upfront fees before providing services. It will go into effect on Oct. 27, so if you can wait a couple of months, you might end up saving a lot of money.
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