Credit Card Debt Management Services – Should You Get Involved?

“It takes great courage to break with one’s past
history and stand alone.”
-Marion Woodman

You’re considering credit card debt management services because you’ve just had it. The bills are piling higher and higher, and so are your frustration levels.

So you look around the internet for awhile and finally choose one of the debt management services to call. They assure you they can boil everything down to a really affordable monthly payment that will get you out of debt in no time.

How Credit Card Debt Management Services Work:

The standard operating procedure for most debt management services goes like this. After listing out all of your unsecured debts, you work out a payment plan. The credit card debt management service is very adept at concealing the fact that not all of this payment is going directly to your creditors—quite a bit of it is going into their own pocket. In addition, your entire first payment nearly always goes directly to the debt management service.

Each payment is immediately placed in an escrow account. The debt management service then writes a letter to each creditor. They also send your signed power of attorney to each creditor. In every case they tell the creditor to “cease communications” with you, the debtor. It’s at this time that they propose a payment plan—usually $5-$15 per month, whether the debt is $300 or $3000.

They’re telling you they’re going to get your interest rates frozen—and they often do, by making sure that card gets sent straight to a third party collection agency. The collection agency can’t keep charging interest on the debt so the debt is, indeed, “frozen.” The debt management service then repeats the same “cease communication” process with the collection agency—leaving you cut out of the loop entirely.

The account manager who is in charge of collecting a $3000 debt is going through the following thought process. She’s working in a third party collection agency which is the final stop before sending the debt on for court action, and possible wage garnishment. She can’t talk to the debtor. She has this agency telling her that her only recourse is to accept what amounts to a 16 year interest free loan on a proven bad debt. Chances are she’ll send the account up to the lawyers—and you won’t even know until the process server knocks on your door.

Meanwhile, you’ve just made a $200 payment—your monthly payment—to the debt management service. It’s sitting in escrow and has yet to be distributed. Furious, you call the credit card debt management service and tell them you’re withdrawing from the program. They inform you that if you read the fine print it will state that any money in escrow belongs to them.

The First Step on the Road to Bankruptcy

It’s unfortunate to note that most people who seek these sorts of consumer debt solutions do so out of a sincere desire to meet their responsibilities, pay off debt, and avoid Bankruptcy. 9 times out of 10 what ends up happening is the painful, expensive lesson that the credit card debt management service hands them makes it far more likely that they’ll end up filing bankruptcy. Find a proven debt elimination program that sees to all of your debt needs and puts you in control of your finances.