When you have overwhelming debt it's sometimes difficult to know what to do.  Should you file for an IVA?  What about bankruptcy?  Some people cannot qualify for either option, and feel they are left with no choice but to try to qualify for a debt consolidation loan.  But there is an additional option open to many people and that is a debt management programme.  A debt management programme helps you avoid having to file for one of these options, and when you work with a debt management company to negotiate reduced payments on your current debts you will be able to freeze additional interest that would be charged on your account as well as stop your creditors from harassing you. 

A debt management programme will cause you to take longer to pay off your debts, but it is well worth it because you will be able to consolidate your debts into one payment that you can manage.  However, you do not have to stay on the debt management programme until the debt is paid off.  This is a very handy option to use if you are in between jobs or are dealing with an extended sickness and a regular income is not coming in.  Once this situation has passed and your income has returned to normal, you can cancel the programme.  It is advisable to give the debt management company you are using two weeks notice of the plan cancellation, and that you will be going back to paying your creditors on your own accord. 

A debt management programme will be based on how much income you are bringing in as compared to how much you have going back out to pay your bills.  The agency you use will work with your creditors on your behalf to develop a payment agreement that will work for you without leaving you broke or without money for emergencies.  You pay the debt management agency and they pay your creditors for you.  They will provide you with payment statements from your creditors so that you can see that the payments have been made.  While creditors should not contact you while you are on this repayment plan, they may contact you if there is a problem with the payments that are being made by the agency.  Listen to what they have to say just in case, and if they are calling simply to harass you let your debt management agency know right away. 

It is a misconception that debt management plans are actually loans to pay off your debt.  They are not.  These plans take all of your debt and develop a plan where you make a single payment to the agency you are working with that is affordable for you.  There are no credit checks involved, but your credit rating could be affected because you are not making your payments with the regular creditor.  Not everyone will be accepted into a debt management plan and not every agreement a debt management company makes will be accepted by the creditors.  Additionally your creditors could still file legal action against you even though you are on a repayment plan.  If this happens, contact the agency you are working with right away and they will help you communicate with your creditors to resolve the problem out of court.