Debt Management Plans And Debt Relief Plans Decoded

One or the other time in your life, you must have owed some money to your parents or friends

. You surely didnt have any legal obligations to pay those debts but this is not the case with the debts that you take up for businesses who go sour. But its not always possible to mitigate all your debts in one go and hence there arises the need to manage them and better plan your finances for the future. If you are wondering what are debt relief and debt management plans and how they can help you, then continue reading below.

What is debt relief?

This is probably the first thing that people try for when they are in debt. Debt relief is nothing but the total or partial writing off the debt. These decisions are taken keeping in mind the total value of the assets of the debts which can be transacted for debt. But debt relief is generally seen in cases of personal debt, international relief debts and the like. Corporates dont really buy the debt relief option. So if you dont have the option of debt relief, the next best thing to do is to move on to debt management plans.

Debt management plans

Debt management plans are agreements between debtors and creditors so as to sanctify a plan that outlines how you will pay back your debts over a period of time. These plans are customized according to the needs of the creditors and the constraints of the debtors. You can contact any of the specialized debt management companies to help you reach a favorable agreement. After investigating your financial position, they may also suggest you to go for debt consolidation under which all your debts will be clubbed into a single debt whose payments will be directed through a single account. All your debts will be reduced to one monthly pay off and one statement. If you are thinking that a debt consolidation plan will reduce your debts to some extent then you are highly mistaken. You will always have to pay back what you owe.

In case you are going through severe testing times, you may consider going bankrupt also. But this is a big decision and you need to be sure that it is the only way out. But is bankruptcy another form of debt management?

There is no doubt that bankruptcy is very powerful. It allows all your debt to be written off and gives you the opportunity to start afresh. But you should know if you are eligible for being declared bankrupt or not. Your financial advisor will assess all the situation and guide you. Another alternative to declaring bankruptcy is the Individual Voluntary Arrangement. Its an agreement between creditors and debtors, where the debt is paid when there is money left over with the debtor. However this is a voluntary arrangement and cant be imposed on the creditors. It also takes into account the debtors income, the flexibility of the creditors and the relationship between them.

There are numerous ways to deal with debt and manage debt. But to know which method will suit you and your future needs you need to engage the services of a financial advisor.

by: chirag savaliya

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