Debt management is defined as a unique strategy developed to help a consumer or debtor manage his or her debts. This strategy is usually employed by a company claiming to specialize in such matters on behalf of the debtor, usually, because the debtor is unable to sufficiently manage their debt due to a variety of reasons, the most compelling of which is typically the overwhelming amount of debt.
Debt management is a general term that most often describes one of the following ways of dealing with consumers that have become overextended with regard to their unsecured debt:
- Consumer credit counseling;
- Debt consolidation loans;
- Debt settlement; and
- Various payment plans.
Although any one of these plans could be the correct course of action for a given situation, each of these plans are also rife with danger and risks. A debt management plan is usually designed to cover only unsecured debts. An unsecured debt refers to any type of debt or general obligation that is not collateralized by a lien or mortgage on specific assets of the borrower in the case of a bankruptcy, liquidation, or failure to meet the terms for repayment. To put it differently, if you default on an unsecured debt, the creditor may only initially bring a lawsuit for the money you owe. The creditor cannot take your car or your home at that time. The most common unsecured debts are:
- Credit card bills,
- Utility bills,
- Payday loans,
- Signature loans,
- Medical bills, and
- Deficiency balances on previously repossessed vehicles (a deficiency balance is an amount that is left over, and that you still owe after a vehicle has been repossessed and sold).
As indicated above, there is no magic answer if you are experiencing debt problems. Debt management plans are only as good as the company that is performing the service on your behalf. Some very clear red flags are companies that charge large upfront fees, companies that instruct you to default on your debts while at the same time having no ability to represent you if and when you get sued, companies that claim to be a law firm but do not permit you to speak to an attorney licensed in the State of Ohio, and companies that have been in business only a short period of time. There are some very reputable companies performing debt management, but fraud and deception are also rampant.
Take your time selecting a debt management company and take the time to seriously consider retaining a law firm that has Ohio consumer law attorneys licensed in the state, with whom you are able to speak with or meet in person. And, ALWAYS, make sure the law firm or attorney you decide to retain is agreeing to represent you in a court of law, should you find yourself in that situation in the future.