How Your Payments Work

The monthly payment in a debt management program is based upon the total debt amount of the accounts entered into the program. Typically the payment is much less than what a client may currently be paying to the credit card companies since the interest rates in a debt management program are significantly less, typically single digit rates. The first payment typically is an enrollment fee, which is not paid to the creditors, but rather sets up the client into the program. A key point to make is that the enrollment fee does not go to the creditors so its important to make the minimum payment to your creditors for the first 30 days until all negotiations are final. If a client can only make the enrollment fee but not also pay their creditors for the first month, they will still achieve lower interest rates. This process is referred to as reaging. What this means is that if a client can only pay the enrollment fee causing them to be late on their bills, the creditors will "reage" or bring the client current on their credit card payments typically after three consecutive payments are received on time. For example, if a client enrolls into a debt management program in February and pay only the enrollment fee, they may receive phone calls, late fees, and over limit fees on their accounts. However, simply informing the creditors that you have enrolled in a debt management plan and providing the phone number to the creditors so they can verify enrollment is all that is needed.

The month following the first month, in this example, March would be the first payment to the creditors, and after April, May and June, it would have been three payments made to the creditors and then the interest rates fall to the single digit rates initially quoted by the counselor. This single aspect of the program is often confused and not explained properly so be sure to ask how this works.

Debt settlement on the other hand is one monthly payment that is estimated typically on a 40% settlement upon years of accurate historical data that the creditors will settle for. The monthly payment is not paid to your creditors on a monthly basis, but rather paid into an escrow savings account that grows while the attorneys send out settlement proposal letters. Credit Solutions is a large debt settlement company that estimates after over 100,000 clients, their average settlement is 41.6%.

Our attorney network benchmark is averaging between 30%-33% nationwide which means more savings for our clients. After over 60,000 clients in our program, we feel confident we will gain our clients the lowest possible settlement with their creditors. Many times creditors will sue their debtors in an effort to scare them into returning payments directly to the creditor. If a creditor chooses to issue a summons for a lawsuit, our attorneys respond, which usually further delays the lawsuit since its costly for creditors to go into court to attempt to collect on an uncollectible judgment. In most cases, they realize its futile to attempt to file a lien on a debtor in financial hardship, and its far more effective to settle for less, as they do settle billions of dollars a year. So while collection agents and bank representatives may tell debtors "we do not work with debt settlement companies" this is an outright lie in an attempt to collect a larger settlement because they know our attorneys will get them to agree to a lower amount. To see actual settlement letters from creditors, visit http://www.debtmanagementguys.com/blog today.

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