Standing Thought

Debt Management

Alan Blinder

More information: www.americanprogress.org/events/2009/09/deficit_event.html

This year, the federal deficit will exceed 11 percent of the gross domestic product—higher than at any point in the country's post-war history. Though the size of the current deficit is due largely to pre-existing policies, economic recession, and one-time policies to revive the economy, there is no question that public concern over the long-term fiscal gap has intensified.

Last month, the Congressional Budget Office and the Office of Management and Budget both released new projections that predict substantial budget deficits in each of the next 10 years. If left unchecked, these long-term deficits could pose significant challenges, including substantially weakening economic growth, constraining much needed public investments, and making the United States more dependent on foreign lenders.

Please join the Center for American Progress and the Center on Budget and Policy Priorities for a conference designed to lay the intellectual groundwork for efforts that the administration and Congress should undertake—once the economy has fully recovered—to put the nation on a more sustainable fiscal path.

Why should I use a debt management company to help with my debt problems?

Article by Richard Marshall

A debt management company (DMC) can offer a service to act as an intermediary for borrowers and the lenders that they owe money to. A debt management company will contact the lenders on behalf of the borrower to renegotiate the terms of existing credit agreements, usually when the borrower is unable to meet their normal monthly repayments.

This will include asking the lenders to accept lower monthly payments and possibly freezing any interest payments and stopping any charges (like late payment fees etc). A borrower can find they need the services of a debt management company when they have a reduced income, possibly because of redundancy, illness, divorce or separation.

There are two different kinds of debt management companies out there to help you:

1. Commercial companies that will charge you a fee for services2. Debt charities that will charge the lenders to negotiate on your behalf

1. Commercial debt management companies

This type of company will charge you on a monthly basis for administering your account, collecting your payments and distributing the money to your creditors. This fee is deducted from your monthly payment. There is also normally a fee payable for negotiating with your creditors to accept the reduced payments and stopping any interest or charges. The first couple of repayments usually cover this fee.

2. Debt charities

A debt charity will help in exactly the same way as a commercial company, however they work in conjunction with, and are funded by, your creditors. This means that the charity has to work within strict guidelines set out by the creditors regarding what is acceptable to them for your living expenses. Customers often complain that they are not left with enough money to survive month to month. The unrealistic expectations of the creditors can lead to the failure of the debt management plan.

It is also worth remembering that a charitable organisation can take up to 2 months, depending on case workloads, just to set up an appointment to discuss your debt problems. This is often far too long for most people to wait, especially when they have lenders breathing down their necks, receiving debt reminders & final demands, getting phone calls at all times of the day and even answering the door to bailiffs. A commercial debt management company will often make contact with you on the same day you make your enquiry.

The main advantage however, is that all of your monthly payment goes to repaying your debts. This will reduce the overall length of your debt management plan because you are paying a fraction more every month.

Which type of debt management company would be best to help me?

A lot of people will also assume that using a charity to help with their debt problems will increase the chance of having their debt management plan agreed. However, it makes no difference whether you decide to use a fee charging company or not because it is up to each lender whether they will stop charging interest to your accounts or accept reduced monthly payments.

A fee charging company will usually have more resources and staff to hassle your creditors into accepting lower payments and freezing interest on your behalf. You need to be able to act as quickly as possible to stop your debt problem spiraling out of control.

One factor to always remember is that a debt management plan is an informal arrangement with your lenders. This means your creditors could still hassle you on the phone or by letter. They could take legal action against you to recover their debt at any time, even if you have been keeping up with your plan's repayments. This fact remains regardless of the kind of firm you work with.

So, which type of debt management company should you use? At the end of the day it is a personal decision, which only you can make. A professional company may be able to act immediately and have more success negotiating on your behalf but using a 'non fee-charging' firm means more of your monthly payments go into repaying your debt.

Whatever decision you do make, please don't continue to use credit cards, store cards or overdrafts to build up your debt. This will just lead to your problem spiraling out of control and could jeopardise your current debt management plan.

As with any business agreement, if your circumstances change during the time you are in your plan you should contact your debt management company immediately. If you are unable to make your monthly repayments for any reason, such as redundancy, illness, divorce or separation, they will need to know ASAP so they can get back in touch with your creditors to try and re-negotiate a new deal for you.

Debt Management

In the wake of the financial crisis of 2008, governments worldwide undertook massive fiscal interventions to stave off what otherwise would have likely been a system-wide financial and economic meltdown. The policy responses engendered significant shifts in growth trajectories and debt sustainability outlooks of both mature and developing economies. For Low Income Countries, post-crisis debt sustainability analyses show an average deterioration of 5-7 percentage points in the present valu

Sovereign Debt and the Financial Crisis: Will This Time Be Different?

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Debt Management question by Largine: Will a Debt Management Plan have an effect on my credit rating?
Hello All,
Will a Debt Management Plan have an effect on my credit rating?
please share your opinion for my question.
Thanks in Advance.

Debt Management best answer:

Answer by Michael M
no. you are paying a fee to have someone tell you to pay your bills on time. it has nothing to do with your credit file. credit file is reveolving accounts, loans and court bankruptcies. that is all and when you pay on time you have no issue. when you are late or do not pay and go into default problem.
debt management is an other scam of the 2000s.

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