Not all debt management companies are alike. Research debt management companies and you will find horror stories of scam-companies that left their customers in worse shape than they found them. You will also find advice from consumers who tell you that you are throwing your money away on a debt management company - they do not do anything you cannot do yourself. Some consumers praise the results of a particular debt management company, while others may criticize. With all the confusing and negative information floating around, it is frustrating to sort through the facts.

DebtDirect.org has done the work for you. We have researched the ins and outs of debt management companies and have condensed the information down to the facts- no conjecture, no rumors, and no name-calling.

Debt Management Companies Are Not For Everyone
That’s right, you may not need the services of a debt management company to control your debt. Some consumers are money savvy enough to cut their own deals with their creditors. They understand interest rates, finance fees, and are not afraid to haggle with a creditor. If this describes you, you can call each of your creditors and attempt to cut a repayment deal that both of you can live with. This still places the entire burden of contacting each creditor, making payment arrangements, and sticking to the terms of each deal, squarely on you. This includes mailing out each payment on time, every time.

For the rest of the population, the thought of speaking to a nasty creditor is unfathomable - packing up the bare necessities and living in a den with a cranky bear in the wilderness is preferable to dealing with creditors. Some people simply do not have the time, patience, or people skills necessary to perform the task. They reason their time is better spent earning more money anyway. These consumers often turn to a debt management company.

What Debt Management Companies Do
Debt management companies contact your creditors for you, negotiate a settlement agreement, and contact you with the repayment schedule. Some companies offer to negotiate the terms of repayment with each creditor and handle paying each debt monthly. In return for their services, the debt management company charges you, the consumer, a monthly fee. A lengthy and thorough review of your financial situation is performed with a trained representative and they determine if debt management is in your best interests.

A debt management company is not a consumer credit counseling agency. They do not offer sound financial advice, nor do they teach you how to keep from acquiring additional short-term debt once your obligations are fulfilled. Some companies do offer special services that include money management training, but you may have to pay extra for these services. This is becoming more common, since the new U.S. bankruptcy laws now require those filing for bankruptcy to receive financial counseling as well.

Important Points To Consider When Dealing With a Debt Management Company
Be sure to find out exactly where your monthly payments are going. Review the list of creditors to ensure no one is left behind and ask what percentage of your payment goes to the debt management company every month.

Some debt management companies negotiate deals with creditors that result in a partial charge-off notation on your credit report. Make sure you specify if this type of agreement is not acceptable early in the consultation. It can take years to repair the damage to your credit rating from a single charge-off. Inquire how your creditors will report your account status to the credit bureaus and know how long it will take to fulfill your debt obligations in full.

What To Avoid When Selecting A Debt Management Agency
• Avoid any company that charges you a fee for a consultation.
• Do not agree to do business with any agency that attempts to pressure you into a contract.
• Avoid agencies that refuse to provide information about the program until after you disclose personal information and the details of your financial situation.
• Avoid companies that charge an unusually high monthly service fee.
• Avoid any company that accepts your case without first reviewing your financial situation.
• Any debt management company that requests voluntary contributions, a.k.a. fees for a company operating as a nonprofit agency, requires closer inspection.

Before you send any money to a debt management company, always thoroughly read the terms of the agreement and get a hard copy for your records. Visiting the National Foundation for Credit Counseling can help you choose a credible debt management company.

You can also read what the IRS has to say about credit counseling companies before making your decision.

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