Unfortunately, enrollment in a program such as a debt management plan does not guarantee debt relief. Often, participants are beset by other financial problems, such as secured-loan defaults, job loss, or other issues that prevent the successful completion of the DMP. No matter what the problem, make sure you communicate clearly with your relief agency and your creditors.
Eligible Debts
Call a debt counseling agency, such as the National Foundation for Credit Counseling. If you're delinquent on your loans, you may be eligible to participate in a debt management plan. You also may qualify if you're about to fall behind. Verify the agency's legitimacy by researching its record with the Better Business Bureau. Be advised: There are caveats. If you were hoping to include your home or car loan in your debt management plan, think again, because only unsecured loans such as credit cards are eligible. Generally speaking, you must include all unsecured debts in the DMP, as debt relief agencies' guidelines state that each debt must be treated fairly. You may be allowed to keep a credit card that's used for work purposes, such as travel.
If you are delinquent on a home loan, you may need to consider applying for a loan modification or streamline refinance. These programs, part of the federal government's Making Home Affordable plan, provide homeowners who are struggling to pay their bills with an opportunity to make their payments more affordable. Contact your lender for instructions.
Consequences of Leaving the Plan
Although debt management plans are voluntary, your lender and counseling agency will expect you to abide by the terms of the DMP. If you find that you are not able to continue paying on the DMP, or if you decide you'll do better on your own, you can leave the plan at any time. There are consequences: Although your lender may reinstate the credit line on a loan that was included in a DMP, you may also be considered in default. Your account may be sold to a collection agency. The favorable interest rate that you received as part of the DMP will be returned to the higher rate. Your credit rating may also be affected if your lenders report that you failed to perform under a DMP agreement.
Missing Payments and Collection Agencies
As defined by the National Foundation for Credit Counseling, the debt relief agency may also opt to kick you out if you've missed payments. Missing the first payment disqualifies participation, as is missing two consecutive payments. Missing four payments in a year or making partial payments equaling four missed months also raises the red flag. These delinquencies may result in your accounts being turned over to a collection agency.
If your account has already gone to collection, it's possible that the collection agency won't permit the account's inclusion in a DMP. If this occurs, your relief counselor will devise a strategy to assist you.
Solving Debt Relief Problems
Stay in touch with your counselor and your lenders, especially if there's a payment issue or a change of address. Make sure you monitor your lender statements to verify that payments are posting in a timely fashion. Send payments through the counseling agency instead of on your own; ensure success by having automatic payment drafts removed from your account every month.
If your lender begins a legal action against you, contact your counselor immediately. You may need to hire an attorney.
0 comments:
Post a Comment