When To Choose Debt Management Over Debt Settlement

July 16th, 2010 | Posted in Credit Card Debt

Given the large amounts of unsecured debt that they are carrying, many consumers find themselves in a position where they need to make a choice among the many debt solutions available. For those with serious debt problems, the most likely choices are bankruptcy, debt settlement or debt management.

Bankruptcy should be the solution only when none of the others appear likely to extricate the consumer from his overwhelming debt, as its consequences to a credit report are so severe and long- lasting. The solutions that need to be examined very closely are debt settlement and debt management, as each will have its advantages in some cases relative to the other.

The least extreme choice is debt management and will be effective for indebted consumers whose debts are still nearly manageable. With some moderate help, these consumers will be able to make headway towards paying down their debt. Debt settlement on the other hand is reserved for more severe debt problems and is a common approach for debt crises that fall just short of bankruptcy.

So what specifics can a consumer look to in order to decide which solution is preferable for them? Here are some of the earmarks of situations that should be handled with debt management:

* The debt is not too overwhelming and is manageable, but it is still piling up

* Organizing your payments is challenging for you as there are so many due dates and payments to handle each month

* You would greatly benefit from some moderate help with your interest rates

Debt scenarios that are ideal for debt settlement would be ones with these characteristics:

* Only minimum monthly payments are being made on high interest rate accounts

* The total monthly payments toward unsecured debt are simply too large; significantly lower payments are an absolute necessity to make any headway

Another factor to consider in analyzing the choice among debt solutions is to consider the amount and length of damage to your credit that will likely result. Debt settlement will do more severe damage to your credit, but it’s normally of significantly shorter duration. Bankruptcy, however, will do severe credit score damage that may last 7 to 10 years, or possibly even longer.

Author excerpt: Jackson Roberts is a senior debt analyst and has been helping consumers with credit card debt relief for over 10 years. He aims to educate indebted consumers about the various credit card debt solutions available.