Personal Finance Turnaround: Debt Management Resources

Time To Read 3 MIN READ

Personal Finance Turnaround: Debt Management Resources

Debt management resources

The most courageous step you can take to improving your financial health is admitting that you need assistance with managing debt. According to Certified Consumer Credit Counselor Natasha Wyckoff, "One of the positive aspects of a fluctuating economy is that you and other consumers have similar challenges." In other words, you are not alone and getting your finances back on track can be easier than you think.

Financial Counseling Resources

Understanding how consumer credit works is fundamental to managing your personal finances. Many businesses advertise credit repair services as the solution to managing debt. Their services can be costly, however, and may not offer education on developing sound money management habits. "There are three primary nonprofit organizations that the U.S. Department of Justice approves as providers of credit counseling services for pre-bankruptcy counseling: National Foundation for Credit Counseling, Association of Independent Consumer Credit Counseling Agencies and the American Association of Family and Consumer Sciences," says Jane Limprecht, public information officer for the executive office for the U.S. Trustees. All of these organizations have member agencies who provide services throughout the U.S. and Puerto Rico. They offer education, counseling and guidance to consumers who want to learn how personal finance works and how to improve their ability to manage income, expenses and savings so they can achieve solid financial footing.

Alternatives to Bankruptcy

Understanding how consumer credit works is fundamental to money management. Two types of bankruptcy plans are available for consumers -- Chapter 7 and Chapter 13. The differences between the two types of bankruptcy vary, depending on personal financial circumstances, income, assets and outcomes. But before you can file for bankruptcy to gain what the U.S. Supreme Court says is, "a new opportunity in life and a clear field for future effort, unhampered by the pressure and discouragement of pre-existing debt," you must participate in an approved credit counseling program. It's this prerequisite to bankruptcy filing that can be the first step to a personal finance turnaround. Credit counseling helps you understand all of the viable alternatives to bankruptcy.

Credit Counseling

Credit counseling is basic education on how to manage your household income, expenses and consumer debt and resolve money-management issues. This type of debt management resource encourages proactive measures such as setting up a household budget and learning how to allocate resources to meet your personal obligations. Certified consumer credit counselors like Wyckoff review their clients' income sources, assets and liabilities, and assist consumers with developing a plan to get their debt under control. Credit counseling enables a better understanding of debt, which can prevent future recurring issues with money management.

Debt Management Plans

Debt management plans are structured programs that you can sign up for after you complete a consultation with a credit counselor. Within three to five years, you can re-establish your financial health through a formal action plan that you and a certified consumer credit counselor work together to develop. The credit counselor then functions like a mediator to facilitate a mutually agreeable solution between you and your creditors. It begins with a thorough assessment of your finances: outstanding debt, household obligations, family structure and income, assets and, in some cases, your future earning potential. A certified consumer credit counselor often can negotiate payment plans that might relieve you of high interest rates and other fees, which makes it easier to pay down your balances more quickly than if you tried to negotiate with creditors on your own. Once you sign up for the debt management plan, you make monthly payments to the credit counseling agency, which then forwards each monthly payment to the creditors on your plan, and you get 100 percent credit toward paying down your balance.