"Nonprofit credit counselors are the good guys in the debt relief industry, which is otherwise full to bursting with lies, scams and sketchy players," according to Liz Weston, NerdWallet Columnist.
"That said, credit counselors need to acknowledge that their signature offering — the debt management plan — doesn't work for everyone."
"Debt management plans are touted as an alternative to bankruptcy and an affordable way to pay back credit card debt. Borrowers make payments to the counseling agency, which then pays the creditors. Thanks to standing agreements that counselors have with credit card companies, the plans typically reduce the interest rates, fees and payments that borrowers are expected to make. Full repayment of the debt often takes four to five years."
"The lack of disclosure about bankruptcy's potential benefits isn't the only problem with debt management plans. Other issues include:
—They aren't designed to tackle many other types of debt, such as mortgages, car loans, student loans and most medical bills.
—Borrowers should expect to live without much access to credit during the repayment period. Their credit card accounts are typically closed and they agree to not apply for new credit, whether it's for another card, a new car or a mortgage refinance. A new account appearing on their credit reports may lead creditors to cancel the debt management agreement.
—There's little leeway for missed payments, which can lead to the plan's cancellation.
Some people find that they simply can't afford the payments on debt management plans, while others drop out because of setbacks such as job loss or unexpected expenses." Read more at:http://www.usnews.com/news/business/articles/2016-08-01/do-debt-management-plans-work