Debt Management Plan vs. Filing for Bankruptcy

 Posted on May 04, 2023 in Debt Collection

If you are having a difficult time making the required minimum payments on multiple debts each month, it is time to start exploring your options. Generally speaking, debtors who find themselves in positions like yours tend to benefit from debt management strategies, debt relief opportunities, or both of these approaches. Sometimes, it is in a debtor’s best interests to file for bankruptcy and sometimes it is in a debtor’s best interests to explore bankruptcy alternatives. Under rare circumstances, it can be helpful to take advantage of more than one broad-based strategy.

Many individuals who are struggling with debt for the first time are unsure of how to evaluate all of the options available to them. Debt settlement companies, consumer credit counseling services, and law firms all advertise debt-related solutions targeted to solve different – yet not wholly dissimilar – financial challenges. It can, therefore, be understandably challenging to assess which approach is likely to be most helpful when it comes to an individual’s unique circumstances.

Below is an introduction to two of the most common debt-mitigation strategies that debtors are often encouraged to explore. As you will see, each approach is more appropriate for individuals who are navigating specific financial challenges.

Debt Management Plans

Debt management plans are offered by many nonprofit consumer credit counseling services. A debtor allows the service to negotiate with their creditors. Once a plan is in place, the debtor submits a single payment monthly – along with a small fee, usually – to the service. The service then distributes the debtor’s funds to their creditors per the terms of the plan.

This approach tends to work well for individuals who can make regular payments on their debts, can afford to pay their debts down in full, and are not facing the risk of any significant legal action from creditors. One of the primary benefits of this approach is that it helps debtors to avoid late fees and to minimize “juggling” all of their accounts if they are not good at bookkeeping. The benefits of a debt management plan are largely administrative.

Filing for Bankruptcy

The benefits of filing for bankruptcy include the discharge of eligible unsecured debts and freedom from legal action for as long as the automatic stay remains in place. Unlike debt management plans, which primarily serve to make repaying debt a more streamlined process, filing for bankruptcy provides eligible filers with an opportunity to benefit from meaningful debt relief.

Schedule a Free Case Evaluation with a Knowledgeable San Antonio Bankruptcy Lawyer for Personalized Insight

It is not always easy to know which debt management and/or relief opportunities will best suit your financial circumstances and meet your financial needs. Thankfully, you do not have to evaluate your options alone. By speaking with an experienced San Antonio, TX bankruptcy lawyer, you can receive personalized guidance tailored to your unique situation.

If you are ready to spend less time worrying about your debt and more time building a solid financial future, schedule a free consultation at Law Offices of Chance M. McGhee by submitting some basic information on our firm’s contact page or by calling 210-342-3400. Attorney Chance M. McGhee has extensive experience assisting hard-working Texans just like you, who are struggling with debt and who are ready for a brighter tomorrow. Our team looks forward to hearing from you.

Source:

https://www.experian.com/blogs/ask-experian/credit-education/debt-management-plan-is-it-right-for-you/