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If you’re having trouble paying your bills on your own, yes, a debt management company can help. And contrary to popular opinion, simply enrolling in a debt management plan does not impact your credit score. Read this article on the differences between debt management and debt settlement companies, and learn why I strongly recommend debt management firms. One excellent non-profit organization is the National Foundation for Debt Management (www.NFDM.org).

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Your issue isn’t just finding a program that will help you become debt-free. But let’s start with that. The National Foundation for Debt Management (NFDM) is an excellent non-profit agency that can help you get your $15,000 in credit card debt under control. You indicated you wanted a program that could lower your interest rates without affecting your credit rating. Well, NFDM’s program meets these requirements. Full disclosure: I am a spokesperson for this organization, so I know the workers, the management team and their philosophy very well. You can trust that they are reputable and will do a good job. NFDM negotiates with your creditors on your behalf. In fact, they have already pre-negotiated with most creditors, so when you contact them (http://www.NFDM.org or 866-409-6336), they will be able to tell you what your new interest rates would be and what your total monthly payment would be to repay all your creditors using a debt management program.

Will You Qualify for a Debt Management Plan Without Your Spouse?

I do have two concerns, however, about your situation. One is that you need to be able to show some income or ability to repay your debts in order to qualify for a debt management plan – NFDM’s program or anyone’s plans. Also, you indicated that your husband is not willing to help you pay your debts and you described these as “my credit card bills.”

Be Honest About What Drove You Into Debt

I don’t know if these are bills you’ve racked up on your own, especially since your message also said you’ve sold all your “jewels and coats.” If you’ve been a shopaholic (and I’m not saying that you have been), it may be the case that your husband is frustrated and is now unwilling to “bail you out.” of this credit card dilemma. Even if your credit card debt is a result of you spending on the kids and the family – perhaps to help make ends meet – you already realize how stressful debt can be on a relationship.

Let Timing and Temperament Work In Your Favor

I would encourage you to do a couple of things to enlist your husband’s assistance. First, find a good time to talk to him about your finances. Make sure it’s a time when he’s not busy, tired, or in a bad mood. Also, be sure that you both will have privacy to air your concerns, so get a family member or friend to watch the kids for an hour or two. Next, approach your husband in a loving, kind way – not in an accusatory manner. Don’t say “Why won’t you help me? That’s not fair!” Instead, let your husband know that you want to make both your marriage and your finances work, and in order for that to happen, the two of you need to be on the same page.

Take a Teamwork Approach to Marital Finances

Ask your husband how you can be supportive of his efforts, and in what ways he’s willing to be supportive of you. I don’t know what his position is on this matter. But he may feel like “I’m already paying all the bills, what more do you want from me?” Whatever he says, try to see things from his perspective, and work toward mutual understand and accomplishing a shared goal: marital and financial harmony. Ultimately, that will help the two of you beat your financial problems – not arguing about money, going to bed and waking up angry (as you’ve stated you’ve been doing), or blaming each other for the current predicament. If talking amongst yourselves doesn’t help, you may also need some marital therapy from a professional marriage counselor, a clergy member, or even just a trusted family member or friend that you both agree can help.

With the average U.S. household owing more than $10,000 in credit card debt, it’s no surprise that millions of consumers are turning to debt management companies or debt settlement firms to become debt free. However, there are enormous differences between these two types of organizations. A good debt management company, such as the National Foundation for Debt Management (http://www.NFDM.org), will offer free or low cost services, can help you preserve your credit rating, and will teach you to organize your finances and budget properly. It will also successfully negotiate with your creditors to give you financial relief.

By contrast, even with the “best” debt management companies, consumers often pay high fees, wind up with serious blemishes on their credit files, and receive little to no financial education. Additionally, while many debt management firms tout “guarantees” about their work, in reality they have no way to ensure that their questionable techniques and unorthodox negotiating methods will ultimately be effective. Read on to discover the downside to using the services of debt settlement companies – and why using a debt management company is far more advantageous.

The Hit to Your Credit Scores

The primary reason that I don’t recommend using debt settlement companies is that they typically advise you to stop paying your bills for a few months – sometimes as long as six months or more. At the end of that period, the debt settlement company goes to your creditors and tries to negotiate settlements on your behalf. The logic used by debt settlement firms is simple: They figure that after a few months of not getting paid, your creditors will be so eager to receive some money (instead of no money) that these creditors will gladly settle your debts for pennies on the dollar.

If only it were that easy.

The problem with this is strategy is two-fold. First, you wind up with serious black marks on your credit reports and you decimate your FICO credit scores. After all, just one late payment can drop your FICO credit score by 50 points or more. Imagine the damage done by being three to six months late on multiple accounts.

Another reason your credit takes a hit with debt settlement is that, when it is “successful,” your creditors agree to accept less than the full amounts owed (even though they will consider the balance as paid). The creditors often then turn around and report to the credit bureaus that your account was “Settled” or “Paid by Settlement” – which still tarnishes your credit records with Equifax, Experian and TransUnion.

Does Debt Settlement Work – Or Does is Backfire?

Additionally, there is no assurance that the methods used by debt settlement firms will work. Instead of caving in to a debt settlement company’s demands to let you pay, say, $30 for every $100 you actually owed, creditors may just decide to sue you, get a judgment against you, or garnish your wages. Needless to say, if any of these events happened, your financial situation and/or your credit would be worsened – not improved.

The Better Method – Financial Education and Reasonable Negotiations

Rather than use a debt settlement company, a better strategy is to first try to negotiate directly with your creditors. If your efforts fail, and you can’t keep up with your bills, then it’s time to enlist the help of a credit counseling agency/debt management firm. A good non-profit, HUD-certified credit counseling agency is the National Foundation for Debt Management. (www.NFDM.org). I’m a spokesperson for this organization, and I know that they do good work and are trustworthy.

Debt management programs are typically scheduled to take three to five years to complete; most debt settlement programs usually take two to four years. Fortunately, enrolling in a debt management program, also known as a DMP, shouldn’t backfire on you – as long as you continue to pay your bills on time. When you enroll in a debt management program, your credit files do include a notation that you are participating in a DMP. However, taking part in a debt management program does not adversely impact your credit rating, nor is it a factor in how your FICO score is calculated, according to executives from Fair Isaac Corp., the creator of the FICO score. Your credit rating also doesn’t suffer because you are paying back everything you owed in a typical debt management program. The cost savings come primarily from having late fees eliminated, and interest rates lowered – two key factors in helping you become debt free fast.

Don’t Forget About Debt Settlement Fees …. And That Big Tax Bill

Obviously, costs vary for debt elimination programs. But $25 a month is a common monthly fee for many debt management programs. Most debt settlement companies charge you in one of two ways:

• a flat fee, which often runs $1,000 or more, and may be based on how much money the debt settlement “saves” you by negotiating with your creditors

• a percentage fee, with fees of 15 to 20% of your total debt being typical
  • So for those with $10,000 in debt, fees would run about $1,500 to $2000 for a 3-year debt settlement program, compared with about $900 in fees for a typical 3-year debt management plan

Why Pay Thousands When You Are Already Thousands of Dollars in Debt?

Besides the fees cited above, it’s not uncommon for debt settlement firms to impose added monthly charges on their clients. These fees can be as low as $20 a month or as high $90 or $100 a month, depending on the company in question. Over time, therefore, consumers shell out several thousand dollars – on top of the initial fees charged – when they opt to go with a debt settlement firm.

Finally, when people enter debt settlement programs, they are usually required to make regular payments to the debt settlement firm before the company will negotiate with your creditors. In other words, they hold onto your money until they deem it’s the right time to approach your creditors. By contrast, with a debt management company, they’ve already pre-negotiated in advance with your creditors. So a debt management company should be able to tell you right away, for example, that your Capital One Visa card with an 18.9% interest rate will now be lowered to 7%; or that your department store charge card from Nordstrom, which was previously at 23.9%, will now be at 0%. (These are examples, of course, but it’s often the case that the pre-negotiated interest rates that debt management companies secure on your behalf will fall between 0% and 7%).

The IRS’s Viewpoint on Debt Settlement

If you enter into a debt settlement plan, one final hazard to be aware of is that you will have to pay taxes on the amount of money you saved. For instance, if your debt was $10,000 and the settlement plan says you only have to pay $3,000, you will be required to pay taxes on the $7,000 you saved. If you are in the 25% tax bracket, you’ll have to fork over $1,750 to the IRS, because the government deems your $7,000 in savings as income.

Clearly, there are many pitfalls associated with debt settlement programs – from unexpected taxes to high fees and damage to your credit rating. As a result, most consumers battling credit card debt and trying to become debt-free would be far better off seeking out the help and services of a reputable debt management firm.