Debt Reduction Planning and Services

There are many, many debt reduction service companies or "plans" out who are there ready, willing and able to promise the debt laden consumers a door out of his debt dilemma. Are these debt reduction services really providing consumers with some measure of relief from debt or are they more accurately setting yet another trap for the debt weary consumer. Debt negotiators, debt settlement plans, debt repayment plans and debt consolidation services are but a few of names by which these services or plans market themselves. Consumer should be aware that these fee generating services and that the plan will first extract their monthly fees and related charges from the debtor's payment toward his pre-existing debts. If the debtor's payments go first to pay the debt reduction company service fees and not to pay down the debt there would seem to be little incentive to hire one of them.

Debt Reduction Plan: Debtor Actions

The debtor is charged with the task of reviewing multiple debt reduction options, plans and services, in determining what the charges associated with plan participation will be and finally reviewing the debt reduction strategy itself. There are many services out there and some are reputable while many others are not. It makes sense consumer evaluation of these plans or services like any other consumer driven assessment, contact the Better Business Bureau, check the general reputation of the company in the local business community and review their connection with peer groups. Reputable credit counselor agencies will often be members of the National Foundation for Credit Counseling (NFCC) and the member agency is often referred to as a Consumer Credit Counseling Service. Consumer Credit Counseling Services are generally recognized as legitimately helpful to debtors in trouble.

Initial Credit Counseling Session

During the initial credit counseling session with a consumer credit counseling service, all of the consumer's financial information, including credit card debt, is evaluated to obtain an accurate understanding and assessment his financial situation. Credit counselors would then analyze the consumer's financial information and devise a reasonable budgeting plan and create a financial base that will provide for the consumer's essential living expenses while retaining everything else for the repayment of his debt. In some cases the credit counselors will advise the consumer to participate in a Debt Management Program. Once the consumer joins a program the credit counselor will work with the consumer's unsecured creditors such as credit card companies, retailers and credit unions to negotiate special considerations for the consumer such as lowering existing payments, reducing interest rates, and waiving fees.

Debt Reduction Service: Creditor Actions

The creditor will then close the consumer's accounts and restrict the accounts to future changes only. The consumer would then make one monthly payment to the credit counselor who would then re-distribute the consumer's payment funds to each of his creditors. Credit card banks will usually accept a lower monthly payment from a customer in a Debt Management Program and sometimes a reduction of up to 50% is arranged although 10-20% is more common. There will also be a reduction in the existing interest rate currently charged by the creditor in a debt reduction loan. Consumers opting for a debt reduction planning route can reduce interest rates to 5-10% and in some cases eliminate interest charges entirely which allows consumers to pay off the debt in significantly shorter periods of time.

Debt Reduction Legal Help

The best debt reduction planning service available to any debtor seeking debt reduction help, even a consumer credit counseling service, is going to shut down all of the debtor's existing credit accounts and take complete control over those accounts and the pre-existing debt. The debtor will be unable to access any line of consumer credit and will be completely cut off from making anything but payments toward his accounts. The result is inherently humiliating and emotionally devastating to an already road weary consumer.

A truly savvy consumer might take the time to consult with a debt reduction attorney concerning his financial dilemma to determine if the attorney could make the exact same settlements on his behalf as the "debt reduction service" might is offer but without simultaneously closing down each and every line of credit the debtor might have and without taking a kind of parental control over all of the debtors financial affairs. A debt settlement attorney is professionally experienced at executing a debt reduction strategy that affords consumer debt settlements with creditors while still providing the debtor with the debt reduction help needed without closing down all other debt reduction options such as a debt reduction loan in the process.