Consumer Debt Management

A consumer debt management program can help people with financial problems by teaching them sound financial practices and standing by them as they attempt to eliminate the stranglehold of excessive indebtedness. This type of program would probably be considered a step above financial counseling. Although such counseling is foundational to the program, a debt management program actually obtains a single payment from the client and then disburses payment to all creditors. However, this is merely one aspect of the entire process. The most valuable part of the program is that it teaches principles of financial management to the client so that he or she can eventually dig a way out of indebtedness and establish a solid financial future.

Setting up a realistic budget is one area which will definitely be covered in a consumer debt management counseling session. In order to construct a unique financial plan for each client, it is necessary to see where funds are currently going. After establishing a list of recurring expenses, and noting spending habits for a few weeks, it will become clear how money is spent and where any 'leaks' are located. Then actual decisions need to be made as to where and how to spend available funds so as to meet all obligations and move toward financial goals.

Other topics which may be covered during counseling include creating a financial action plan, controlling and reducing debt, and learning how to save money while shopping for necessities. The importance of starting a savings account will also figure into the instruction. This will eventually help individuals to not have to rely upon credit cards to bail them out of emergency situations. Speaking of credit cards, the proper use of these items and how to avoid common credit pitfalls will be discussed. However, during the time that the client is involved in a consumer debt management program (which may be a duration of several years), the consumer will not be allowed to use the cards with which he or she has incurred the present problem. Some programs suggest reserving a single card which is not part of the program for true emergencies. Topics such as buying a home, car or insurance will also likely be covered. The program is supposed to be designed with the client's needs and interests in mind, so do not hesitate to ask for help with specific areas related to consumer debt management.

A typical consumer debt management program will be run by trained and certified professional counselors. These individuals will also help the client by working with creditors to possibly reduce or eliminate certain late fees or over-limit charges. They will also establish a monthly payment amount with the creditor and try to arrange for further time to pay off the debt. On-going counseling and assistance should be available throughout the program, and most have evening and weekend sessions to accommodate any work schedule. Some organizations even check up on former customers after they have completed the program to make sure they are staying on track with their financial goals. Many have continuing online resources, such as financial tools, calculators and a variety of helpful articles about relevant topics.

At this point, it might be wise to clarify that there is a great difference between a consumer debt management program and debt negotiation. The latter may be risky and have a negative impact upon one's credit score. In turn, this may make it more difficult to get credit in the future. Most states have laws regulating the programs and services of negotiators. Contact the Attorney General of the state for further information about these regulations. Check with the Better Business Bureau before entering into agreements with any organizations. The better Business Bureau can inform consumers about prior complaints lodged against these businesses and whether they are in compliance with current regulations. If such caution seems unnecessary, remember that some negotiators have falsely represented what they are able to accomplish in the area of removing negative information from a credit report. Others have signed people up for debt reorganizations without informing them that this is actually a bankruptcy filing!

Contrary to commercials and advertisements aimed at those in need of consumer debt management, 'credit repair services' will not be able to remove negative information from the credit report if it is accurate. Also, consumers already have the right to have incorrect information removed from their reports with no cost to themselves. A free credit report from the three top credit reporting agencies is available once a year so that consumers can keep informed about their own credit scores. The only way to change a bad report is to faithfully continue to pay off the debt. Therefore, any credit 'repair' services are an unnecessary expense.

The best way to deal with consumer debt management is to obtain information about handling finances in a Godly manner, and then to act on this information. There are some Christian organizations which use biblical principles to teach consumers about properly managing their finances. These can offer information, counseling, prayer and a financial action plan built on biblical principles. Otherwise, the possibility remains that unwise financial practices will be repeated and the cycle of debt will continue to add great stress to an individual's daily life. "For what shall it profit a man, if he shall gain the whole world, and lose his own soul? Or what shall a man give in exchange for his soul?" (Mark 8:36-37) The spiritual aspect of financial instruction is an area which is often neglected. However, a person's relationship with God is actually his or her greatest treasure.

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