Letters to Send to Creditors When Working With Debt Counseling

Enrolling in a debt management program seems like a pretty simple process. However, the reality is that it's a bit more confusing than the credit counseling agencies would like you to believe. Signing up for a debt management program requires a bit of administrative work, including written communication with your creditors.

Debt Management Basics

While filing for bankruptcy wipes out your unsecured debt and destroys your credit score, debt management programs require you to pay off your debts in full and minimally affect your credit. Debt management programs work with your creditors to reduce your interest rates and make your debts much easier to pay off. The idea is that your money ends up going to the principal, not the interest, and you'll be able to pay off your debts within five years.

Initial Proposal Letter

When you sign up for a debt management program, the first thing that happens is your counseling agency will send out written proposals to each of your creditors. The terms in question include your desired interest rate and monthly contribution. The counselors usually know what terms the creditors will agree to, and their proposals generally fall within this expected range, but the proposal must be agreed to before the counseling agency can begin paying your creditors. While you're waiting for your proposals to be accepted, you must pay your creditors as well as the administrator of your debt management program.

Response to Proposals

Some credit card companies send out letters stating that they've received your proposal, but this letter doesn't do much for you. The real letter you want is the actual response to your proposal. A few weeks after your proposals are sent out, you should start receiving responses either accepting your terms or suggesting revised figures. Your counseling agency should contact you to see if these terms are acceptable, after which time you must wait for the creditor to officially state that these are your new terms. After you're completely enrolled, keep these letters as proof of the concessions your creditors have agreed to make.

Monthly Statements

You might not have given your monthly statements much thought in the past, but they're crucial elements to your debt management program. These statements will show your new interest rate as well as payments made by your counseling agency. Your counselors may ask you to forward your statements each month so that they can verify that you're getting the correct interest rate; this will also help them to keep track of your balances over the life of your program. If you see anything on your statements that differ from your agreed-upon terms, don't hesitate to contact your creditors and your counseling agency.