What is the difference between debt management and debt settlement? What about debt consolidation?
What are the benefits of working with The Village?
How is The Village funded?
Can your agency stop legal action and collector phone calls?
Are most creditors willing to work with your agency?
Why are creditors more apt to reduce payments through your agency rather than directly with me?
How does your agency's program differ from a "Chapter 13" bankruptcy?
How long does a bankruptcy stay on my credit report and how does it affect my credit?
What is a debt management program?
Will being enrolled in the DMP stop interest from being charged on all accounts?
What if I can't make a payment one month?
Do I need to notify my creditors if, for any reason, I discontinue the debt management program?
How will the debt management program affect my credit?
Does The Village report monthly to the credit bureau on how my deposits were made?
If I enroll in the debt management program, can I still use my credit cards?
What is the difference between debt management and debt settlement? What about debt consolidation?
DEBT MANAGEMENT
Debt management plans (DMPs) are administered by nonprofit credit counseling companies, like The Village, as opposed to debt settlement companies, which are for-profit. In a DMP, the credit counseling company negotiates with your creditors to reduce your interest rates and fees, or lower monthly payments for you. You still pay off the principal amount, so your credit score is not impacted as it would be with debt settlement. Credit counselors will also help you to improve your money management skills and come up with a workable budget.
DEBT CONSOLIDATION
Debt consolidation is a process in which you combine multiple debts into a consolidation loan. This is a single loan that rolls all your prior debts into one monthly payment at one interest rate. Consolidation loans are offered through financial institutions including banks, credit unions, and online lenders and your debt payments are made to the new lender.
DEBT SETTLEMENT
Debt settlement programs are typically run by for-profit companies. The company negotiates with your creditors so that you can pay a lower amount than what you owe, often in a lump-sum settlement. When you settle debt, you’re effectively asking one or more of your creditors to accept less than what’s owed on your account. If you and your creditor(s) reach an agreement, then you would pay the settlement amount in a lump sum or a series of installments through the debt settlement company. An important thing to note is that a debt settled for less than the full balance may have tax implications because the forgiven debt will likely be reported to the IRS as income.
What are the benefits of working with The Village?
A financial counselor can analyze your financial situation to help you determine your options. If one of the options is a debt management program, you may have fewer creditor calls and be on the road to becoming "debt free."
How is The Village Financial Resource Center funded?
Our funding comes from a variety of community resources, with the majority coming from voluntary creditor contributions.
Can your agency stop legal action and collector phone calls?
In the majority of cases, we are able to work with creditors to develop a solution that will satisfy everyone and generally stop any legal action. If you maintain your payment arrangements with us, the majority of phone calls will stop.
Are most creditors willing to work with your agency?
Yes, most creditors support the services our agency provides.
Why are creditors more apt to reduce payments through your agency rather than directly with me?
Creditors are willing to work with us and through our agency, with you, because we help you develop a realistic action plan to solve your particular financial situation.
How does your agency's program differ from a "Chapter 13" bankruptcy?
Our agency's debt management program is voluntary for both you and your creditors. Therefore, all creditors may not waive interest. When you file for Chapter 13 bankruptcy, the court will administer the plan and all interest will be stopped. Bankruptcies are public record. Filing bankruptcy may affect your ability to obtain credit in the future.
How long does a bankruptcy stay on my credit report and how does it affect my credit?
Under the Fair Credit Reporting Act, a federal law, a bankruptcy can remain on your creditor report for up to 10 years and will not clean up a bad credit record. For example, it can make it more difficult for you to get a mortgage to buy a home.
What is a debt management program?
As part of the Debt Management Program (DMP), your financial counselor will set up a payment schedule for you to repay your debts. By voluntary agreement, you deposit funds with our agency each month, which we then send to your creditors. If collectors call, ask them to contact us. You may also receive a reduction or waiver in finance and/or other charges. The Debt Management Program through The Village is available only to residents of North Dakota and Minnesota. We can connect residents of other states to a certified agency near them.
Will being enrolled in the DMP stop interest from being charged on all accounts?
No. Your counselor will be able to tell you if any of your creditors will consider stopping interest charges. However, the majority of the creditors do not stop interest.
What if I can't make a payment one month?
Contact your financial counselor. Your counselor will work with you to find a manageable solution if you are having difficulties.
Do I need to notify my creditors if, for any reason, I discontinue the debt management program?
If you discontinue your debt management repayment program at any time, it is your obligation to advise your creditors of your current mailing address.
How will the debt management program affect my credit?
Several factors affect how your credit report will look during participation in (or after completing) the debt management program. These include what your credit report looked like when you entered the plan, the consistency of your payments while on the plan, whether you increased payments over time, and a creditor's reporting policies.
Does The Village report monthly to the credit bureau on how my deposits were made?
No, but the majority of the creditors will still report your individual account history to the credit bureau.
If I enroll in the debt management program, can I still use my credit cards?
No.* If you decide to participate in the debt management program, you must stop using credit. As a rule, your creditors will close or suspend your lines of credit. Upon successful completion of the plan, some creditors will re-establish your credit based on your current ability to pay and your payment history while enrolled in the plan.
*In limited cases (for example, if you travel for work), you may maintain one credit card. The balance must be paid in full each month and will be subject to periodic confirmation of account balances by our agency.
To visit with a Village financial counselor, call 1-800-450-4019 or contact us online.