is debt management advisable?
NO! I am working on getting us out of one as it has totally screwed up our credit because you actually stop paying your creditors and pay the DM company to settle with the creditors. The problem with the one we are with is that they started settling with our creditors and before we had anything saved to pay them with. Once you settle then the creditor wants their money now in lump sums. It’s too much of a headache. You are better off working with your creditors yourself.
But in general I think it depends on the company.
Some companies do what is described here, and nothing goes in to your creditors until so much is built up. According to everything I have read in Consumer Reports, Money, Kiplingers, etc. this is a SCAM and set up to really screw you. The reason is that the creditors are not getting anything, just reporting you as late/non-paying.
I have known people who have worked with Consumer Credit Counseling Service (through Lutheran Social Services, I think) – you don’t have to be Lutheran. They help everyone. You pay them a set amount for your bills, but they send the money to your creditors every single month. Up front, the creditors agree to take a particular amount of money and you know up front what is going to the creditors. It will still take years most likely to dig yourself out, and the accounts will not be available to you to use until the program you enter is complete, but the people I have known that did it stopped the collection calls, the harassment, and were able to sleep at night.
You still get a statement each month from the creditors, so you can keep track of things and verify that your payments have been made. The creditors get paid only once a month on the date that CCCS negotiates with them, so when you make your payment, that’s it. They will not charge you for being late, past due, etc.
There are legitimate companies out there willing to help you dig out of the hole and there are scam artists out there, no matter how “legit” they look.
You can do it on your own, but it takes discipline and a determination to do it. Can you stop using the accounts long enough to make a difference. I have been reading that Dave Ramsey book, the Total Money Makeover – get it for free from your local library – and the debt snowball makes sense.