A: Debt Management
In a debt consolidation programs, also known as a Debt Management Plan (DMP), the debtor pays back 100% of their debt plus interest. Interest is commonly reduced to the 8% to 10% range. Additionally, most Debt Management Companies have a monthly service fee tacked on to the monthly payment. Most people pay back about 130% of their debt over 5 to 6 year period. Debt Management has a moderate affect on a good credit file and will improve most poor credit files. But, a Certified Debt Arbitrator is qualified to explain both programs to you and will be able to provide you the differences in monthly payments as well as the pros and cons of each program.

Debt Settlement
In a Debt Settlement program, most clients pay back an average of 54% of their total debt, including all agency fees as well as accruing fees and interest. This 54% figure is based on the client's starting balances.

In some cases, where a client has very challenging creditors combined with a good income, liquid assets, etc., we may end up with what is considered to be a less than perfect result and pay back may be in the 60% range. This is still a substantial savings for most clients and proves to be an effective program.

Also, the contrary is true. Certified Debt Arbitrators often are able to obtain total settlements including fees in the 40% range when the factors are just right.

Most clients are able to liquidate their debt in 2 to 3 years vs. 5 to 6 years in the DMP and the monthly payment is commonly smaller than a Debt Management Payment for the same debt.

Debt Settlement has a major impact on good credit but will improve credit for people that are 6 months or more past due. This improvement in credit profile is caused by bringing outstanding balances down to a ZERO balance.

Learn more about a career as a Certified Debt Arbitrator
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A: Debt Settlement is when your creditors agree to accept a lump sum payment for less than the actual balance due. In simple terms, it means your creditors agree to take less.

It is accomplished by negotiating with your creditors. The IRS as well as some creditors, refer to Debt Settlement as Debt Forgiveness, Settlement in Compromise, or a Negotiated Settlement.

Occasionally, a creditor may agree to accept a lesser amount and will allow the settlement to be paid over time, by making monthly payments. This is very rare as most of the time in order to obtain a favorable settlement, it must be paid in full and typically within 10 days of reaching an agreement.

If a creditor does agree to a settlement and allows you to make monthly payments, it is generally a short time-3 months or so, and results in high monthly payments. On rare occasions, a creditor may allow the balance to be paid over 1 year, but this is rare.

Monthly payments on settlements seldom occur when accounts are placed with 3rd party collection agencies or attorneys as they require immediate lump sum payments. Collection agencies often do not have the authority to accept monthly payments on a settlement. However, in a few rare cases, a collection agency may agree to a settlement amount if approved by the original creditor and allow the balance to be paid over time; however this is even more rare.

In short, the best settlements occur when cash is available to immediately settle the account. For this reason, a debt arbitration program is based upon your setting aside funds each month so you accrue funds and we have money to offer your creditors a lump sum settlement. This is done on a first come - best deal - first serve - basis.

Learn more about a career as a Certified Debt Arbitrator
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