Think back to your days in elementary school. “Students, it’s time for vocabulary so get a out a piece of paper and a pencil.” Remember those days? I’m going to give you the first our vocabulary for today: Debt Management Plan and Individual Voluntary Arrangement.
These three words may be welcome news to you if you are in over your head with debt. I have been on a crusade as of late against debt but I haven’t spoken to those people who have debt that is consuming them so let’s take a look at what a Debt Management Plan is.
A Debt Management Plan is exactly what you would think. It is an agreement between you and your creditors to pay your debt obligations. This is normally for people who have a smaller amount of debt and believe their financial issue will be short term. It can be set up either with the assistance of a debt management service or on your own. Debt management services often will charge a monthly fee and they will negotiate with your creditors. As you can imagine, although you will pay for the service, these companies have relationships with your creditors and may be able to set up a more attractive plan for you.
You can also call your creditors and attempt to negotiate a plan on your own. The generally works best when you aren’t seriously behind in payments. Once your creditors begin sending collection letters, you are often best served to get help.
If you are seriously in debt and getting the calls and letters from your creditors, you should probably look at an Individual Voluntary Arrangement. This is a legally binding contract approved by the court and at least 75% of your creditors. You agree to pay a set amount of normally 3-5 years and once that time has passed and you have been current on your payments, all of your debts are forgiven.
So if you are in debt, you have options. If you feel that your debt is too much for you to take care of on your own, get help as soon as possible.