Financial Education

Debt settlement programs are typically offered by for-profit companies and some law firms to help consumers who are unable to repay their unsecured debts as originally agreed or through other creditor-approved repayment options, such as hardship programs or debt management plans. In a debt settlement program, you make monthly payments to the settlement provider instead of directly to your creditors. Those funds are held in a dedicated account until enough money has accumulated for the provider to attempt to negotiate a settlement with one or more of your creditors for less than the full amount owed. During this process, your creditors generally are not receiving payments. As a result, collection efforts continue or increase, and creditors may assess additional interest and fees, report missed payments to the credit bureaus, file lawsuits, or pursue other legal remedies. Not all creditors agree to settle debts, and there is no guarantee that a settlement offer will be accepted.

A Debt Management Program is a payment plan between you, RethinkingDebt, and your unsecured creditors.  In this plan, creditors agree to offer special concessions to help you get out of debt.  These concessions may include reducing your interest rates and stopping late and over-limit fees.  This plan can reduce the months or years of repayment. 

We assist our clients with reducing the interest rates to help make their payments more affordable and to pay off the debt in a more timely manner. However, we do not reduce the overall balance as this would be a considered a debt settlement.

When you are initially enrolled into the program, the creditors can close the accounts. This can cause a slight decline. However, as you make consistent on time Debt Management Plan payments, each creditor on the plan will update the credit report each month. This can cause a positive effect over the course of the program as you pay down the debt.

This is a great question! The debt management program is a structured plan designed to help pay off your debt in an efficient and timely manner. Many of our clients are struggling to make minimum monthly payments which can cause them to fall behind and to receive late fees which add to balances and can negate the payments you are making. Once your Debt Management Plan has been established, you begin making consistent on time payments to your creditors therefore helping to improve your credit score. Experian says: “The impact on your scores may be minimal, depending on how the payments are managed and if you have other positive accounts. The most important thing is that you must make sure that the company will immediately take over the payments so that you never miss a payment in the transition to their service. As long as all your payments are made on time, it won’t matter who paid them and there is no scoring issue from that aspect.” Typically, our clients notice improvement in their score within the first year they are on the program and by the time they make that last payment, they experience relief and pride in seeing what they’ve accomplished to help improve their credit and ultimately their future.