Debt management programs are designed to help people, who are having problems meeting their financial obligations, eliminate their debt in the quickest and cheapest manner possible. Once signed up, your counselor will assess you financial situation and assist with creating a debt management plan.
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Your counselor will contact your creditors and inform them that you have signed up with their firm and are in the process of correcting your debt. He or she will then negotiate the lowest interest rate and monthly payment possible, try to waive or reduce your late fees and penalties, and consolidate your debts into one. Each month you will make one monthly payment to the consumer credit counseling agency which will immediately distribute it to your creditors according to the terms that were arranged. In order for you to easily meet your financial obligations, you can usually choose the date on which the monthly payment is made.
Because consumer credit counseling agencies have been working with your creditors for long periods of time, your counselor can negotiate a much lower rate than can be achieved by applying for personal debt consolidation loans through standard financial institutions. Also, creditors have incentive to cooperate and work with consumer credit counseling agencies in lowering your interest rates and monthly payments because they see it as a way of getting paid. If you file Chapter 7 Liquidation Bankruptcy, then unsecured creditors may not get paid at all.
Throughout the life of your program, the consumer credit counseling agency will provide you with ongoing advice and education, as well as, with multiple resources and guidance to help you eliminate your debt and achieve financial freedom.