Definition
Debt management is the act of maintaining control of debt accounts, reducing outstanding debt and restoring a consumer’s credit rating.
Analysis
Debt management can be performed by many consumers on their own if their situation is easily recoverable. It requires a budget surplus and determination. If the budget shows a monthly deficit, then credit counseling may be necessary to avoid eventual default.
Credit counselors may be able to help some consumers prepare a self-guided repayment strategy that allows them to manage their own debt. Unfortunately, many consumers wait until it is too late to manage their own debt before asking for help.
Once debtors get in over their heads, they may need a more active approach to debt management. Credit counseling agencies provide a debt management program that can help reign in interest rates, reduce fees and help a debtor maintain or regain current account status.
Credit counselors can help a debtor develop a debt management plan (DMP) that is tailored to the individual client’s needs. A client’s creditors, types of accounts and their budget can all have an impact on the structure of the DMP.
The results of debt management vary greatly, depending on the needs and commitment of the debtor. The goals include repayment of debt, restoration of credit rating and improved consumer behavior.
