Debt management plans, otherwise known as DMP's, are offered by credit consolidation agencies to customers who are currently going through financial hardship or overextension. These customers hire the services of these debt relief firms in order to pay off all their defaulted bills. A DMP is also a good way for an individual to be able to manage their debts without resorting to bankruptcy.

Before actually agreeing to be enrolled to a debt management program, an individual needs to ask the following questions to the debt consolidator. The answers to these questions will determine how the program will be applied towards the customer's loans.

A debt management program does not completely guarantee a scot-free existence. Yes, it is a great help in terms of debt relief, but it is not designed to be the perfect solution to eradicating all of an individual's debts.   As in everything, there are still risks that exist.

A debt-to-income (DTI) ratio is the percentage of an individual's debts taken against his monthly gross salary. This measure illustrates how much of a debtor's income is used to pay all his or her creditors, collection agencies, and lenders, divided by their gross monthly income. According to lenders, this figure represents the payments a borrower can reasonable afford without defaulting on their other payments.

When you encounter financial difficulties due to excessive debt, you may need professional help in extricating yourself from the ever-tightening net of debt collectors. Rest assured that professionals are available who are experienced in working to resolve those issues that you cannot fix yourself. However, when seeking assistance in dealing with monetary difficulties, making the right choice in professional help is critical. Before deciding to engage the services of a debt settlement law firm, consider the limitations that may hinder this type of service from negotiating the best outcome for your financial situation.

When consumers apply for a credit card, car loan, or mortgage, lenders want to gauge the risks involved before loaning money to a potential customer. What credit score are they most interested in - Equifax, Experian, or TransUnion? The fact is that 90 percent of lenders, including most of the largest banks, are only interested in the scores generated by the Fair Isaac Corporation (FICO). There are three FICO scores, one for each of the three credit bureaus which most people are familiar with—Experian, TransUnion, and Equifax—and each score is based on information the credit bureau keeps on file about an individual.

To figure out how much exactly your debt to income ratio is based on your monthly earnings and expenses, here's an illustration just to give you a clearer picture of how this works. For example, Karen's gross monthly salary is $5500:

Enter the scammers. “If it seems too good to be true, it probably Is,” that is probably the most overused slogan in the bankruptcy business and yet some consumers still fall for it.  The consumer must remember that easy or quick-fix are not the words that would describe how life is going to be like after the discharge and that there is no such thing as “protection from bankruptcy”.

For practical reasons, and in the event that the relationship falls apart, monetary obligations between spouses should be separate from the onset. When two people get married it does not have to mean that they should also share or inherit each others’ debts and credit history--unless they really want to.
If that is the case, as required by the law, the couple has to apply for joint credit.

If a debt collector contacts the consumer regarding an old debt, he/she should not admit to that debt (because he/she, in truth, doesn’t possess yet his/her credit report and therefore doesn’t know if errors were made in the reporting) and do not agree to make any payments.

In the case of assets that are tied to collateral, the creditors’ argument usually is that as long as the case is pending, the value of those assets depreciates. To defend against it, the consumer should prove to the court that those properties are still in good condition. This argument is strong in cases wherein with properties are worth more than what the consumer owed (perhaps a house in a rising upstate place, a special edition vehicle, antiques and jewelries). The court would agree that the value of those would not diminish in time, or that their value would actually increase with time.

The word “feasible” is defined as “Capable of being accomplished or brought about.”  Applied to Chapter 13 bankruptcy, it simply means that the creditors and/or the trustee of the case do not believe that the consumer’s proposed repayment plan is going to be accomplished or that the consumer is going to bail out on it before its official end.

If due to unavoidable circumstances or financial issues the consumer is unable to complete or fulfill his/her obligations to the plan then he/she may ask the court for a hardship discharge

Identity theft is a serious phenomenon currently rampaging American consumers young and old. In 2008, the Federal Trade Commission conducted a customer complaint survey, and identity theft was pinpointed as the number one consumer grievance for that year. Thirty-six percent of the total complaints received by the government regulatory body last year consisted of this grave misdemeanor.

After the creditors meeting, the consumer must make sure that the trustee did close the meeting officially. The importance of which is that the trustee and creditors have only 30 days to challenge the consumers exemption claims. Imagine if the consumer fails to check the court files about the supposed adjourned meeting, the trustee and the creditors would have plenty of time to challenge the consumers’ exemption claims.