How Debt Management Protects You From Insolvency

Most of us are aware that we live in precarious times.  With a recession only recently behind us and inflation threatening to continually increase the cost of essential goods and services, many households are concerned about the possibility of becoming insolvent.  In fact, there are predictions that insolvency among consumers could increase by as much as 10% during 2011, a sobering statistic that has many people wondering if they need to brush up on their debt management skills.

In fact, practising proper debt management is key to keeping the household budget balanced and the finances in order.  For some, financial management seems to come as second nature, allowing them to put together a budget with relative ease and stick to it, no matter what the economy throws their way.  Others are not quite so fortunate and find that they need professional assistance in order to return their finances to an even keel.

Debt management services often do more than simply educating consumers on ways to manage current debt.  In many instances, these services also provide assistance in planning an effective budget, advising how to slow the process of debt accumulation and in general how to manage money more efficiently.  The goal of many debt management services is not to just help consumers resolve a current crisis, but also equip them with the tools to prevent a recurrence of those same circumstances a few years down the road.

Typically, this means preparing debt management plans that work on more than one level.  Central to the task is creating a budget that makes it possible to deal with current debts in a timely and effective manner.  This sometimes involves the management company working with creditors to make special arrangements that stop the accumulation of interest in return for the remittance of a set payment each month.  With this solution, the consumer pays one consolidated monthly amount to the service company, which in turn disburses payments to creditors in accordance with the agreed terms.  The consumer gets to see the level of debt reduce each month, without having to deal with phone calls and other attempts by creditors to collect the outstanding debts.

At the same time, many debt management plans also include consumer education that is aimed at helping debtors from making the same mistakes in future.  Often, courses in money management are included that help to change the consumer’s approach to making purchases, learning how to live within a budget, how to build savings for later years and how to be generally more responsible.  If the financial condition of the consumer warrants it, the service may also provide some limited bankruptcy advice, including information on bankruptcy fees, how bankruptcy can affect credit ratings and how, in some cases, a debt management plan may be a better option.

The ultimate goal of any debt management approach is to help the consumer get out and stay out of debt in the future.  Between bankruptcy advice, assistance with budgeting and working as an intermediary with creditors, a reliable debt management service can be the difference between regaining control of your finances or becoming part of that 10% increase in insolvencies that is projected to take place during the current year.