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Debt Management or Debt Settlement
Which Alternative Is Right For You?

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You may be asking, "Okay, so what is better for me, enrolling in a Debt Management Program, or seeking relief through a Debt Reduction Settlement?" The answer is, it depends on many factors—and like everything else in life, there are trade-offs,

The first step in deciding what avenue to take is to consider the type of debts you have which you would like to resolve. As you will discover next, a Debt Management Program is much more restrictive in the types of debts that are allowed in the program. Therefore, depending on your objectives and type of debt, the answer may be clear cut.

For some consumers a Debt Reduction Settlement may be their only alternative. For other consumers it may be necessary to decide which is a better alternative, and hopefully in reading the following, a choice can be readily made. In some cases, seeking a Debt Reduction Settlement on some accounts and enrolling the other accounts in a Debt Management Program may prove more effective.

Below we list various types of debts as they apply to the Debt Management Program and Debt Settlements. In our next section we include a number of important facts that must be considered. In reviewing this material, you should be able to determine which alternative is most appropriate for your needs.

The following types of debts CANNOT be placed in either the Debt Management Program or through a Debt Settlement Plan.

  • Mortgages
  • Auto Loans
  • Most Secured Debts*
  • Child Support
  • Bounced Checks
  • Fines Stemming from Legal Matters
  • Taxes*
  • Student Loans*

Secured debts may be settled when the "security interest" has diminished in value to the point where repossession is impractical.

Taxes and government student loans are limited to "payment arrangements" and "offers in compromise."

The following types of debts CANNOT be placed in the Debt Management Program but may be settled for less than what is owed through a Debt Reduction Settlement.

  • Auto Leases
  • Office Leases
  • Equipment Leases
  • Lease Defaults
  • Repossession Deficiencies
  • Liens
  • Judgements
  • Business Debts
  • Business Credit Cards
  • Debt Stemming From Lawsuits
  • Rent Owed to Previous Landlords

The following types of unsecured debts can be placed in the Debt Management Program but typically are not granted forbearance. They may, however, be settled for less than what is owed through a Debt Reduction Settlement.

  • Installment Loans
  • Signature Loans
  • Billing Disputes
  • Attorney Fees

The following types of unsecured debts can be placed in the Debt Management Program or be settled for less than what is owed through a Debt Reduction Settlement. When placed in a Debt Management Program, however, it should be noted that while a lower payment may be arranged, interest relief may be granted, and late fees may be stopped, these types of accounts are not typically re-aged, and thus, may be reported as being past due and may eventually be charged-off to profit and loss.

  • Accounts Payable in Full Within 30 Days
  • Gas Charge Cards

The following types of unsecured debts can be placed in the Debt Management Program or be settled for less than what is owed through a Debt Reduction Settlement. When placed in a Debt Management Program, however, it should be noted that while a lower payment may be arranged on credit card debt and bank loans, federal banking regulations require that three consecutive payments be paid through the agency before interest relief can be granted, late fees stopped or accounts re-aged. This regulation does not apply to debts owed to non banks, although other creditors may have similar requirements in their hardship policy.

  • Credit Card Debt
  • Medical Bills
  • Store Charges
  • Service Contracts or Charges
  • Past Due Utility Bills (from previous service providers)
  • Subscriptions
  • Memberships and Dues

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