debt management program

The ability to build and attain credit gives consumers purchasing power, but it can also be a slippery slope. If you’re like many Americans and your debt has crept up higher than it’s possible for you to pay off, you may be considering bankruptcy. But before making a decision, knowing your options will help you make a better, more informed choice.

The first question you should ask yourself: Is debt management better than bankruptcy? While the best answer to this is better done case by case, for many, debt management programs are a more effective and safer option.

Bankruptcy Can Have a Long-Lasting Impact

Although filing for bankruptcy may clear your credit, there are plenty of negative repercussions to think about before going this route. When you declare bankruptcy, you are granted an automatic stay, which keeps creditors from trying to collect. But while there are some variations on what you can expect depending on whether you file for Chapter 7 or Chapter 13 bankruptcy, it can live on your credit report for up to 10 years. Because the information contained in bankruptcy case documents is a matter of public record, another caveat is that potential employers and landlords may be able to see that you’ve filed, potentially impacting your ability to find a job and housing.

Under law, you cannot file for bankruptcy until you’ve undergone credit counseling. However, credit counseling can offer an alternative path for climbing out of debt and taking back control of your financial well-being without the negative impact of declaring. 

Benefits of a Debt Management Program

With a debt management program, you work with counselors to consolidate unsecured debt—credit cards, medical bills, collection accounts, and personal loans —and pay them down in three to five years. Another perk? Counselors are also expert negotiators and can often get your interest rate knocked down.

The caveat of a debt management plan is if you don’t follow through, it doesn’t work. But if you are consistent with your repayment, over time, your credit score will recover to a healthier number. However, there are some rules you should remember when embarking on this option—don’t forget to make your payments on time, and credit cards are only for emergencies. Whatever you choose, it’s a step toward a healthier financial future.


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