When a debtor is pushed to the wall and realizes he or she does not have sufficient income to cover debt payments, there are typically two final solutions available. The first is to undertake a debt management plan, and the other is to file for bankruptcy. Both will usually provide some level of relief. Once they are successful, the creditors can no longer keep pursuing the debtor for payment as a third party is involved in determining how or if they will get payment. When it however comes to reputation, debt management plans are better than bankruptcy. With bankruptcy, anyone who pulls your credit report will learn about the filing. Your employer may also learn about it if compelled to legally deduct your pay on behalf of creditors.
With debt management plans however, the onus I son the debtor to ensure payments get to the third party in good time. Even if the plan may be reflected in your credit report, the damage is not as severe as with bankruptcy. Another benefit is that with debt management plans, a debtor may still be able to continue accessing credit. Many agree with the third party on how they can continue to use their credit cards as long as it does not interfere with the agreed upon payment amount.
With both options however, there is still the possibility of losing property. Debt management plans do however allow a debtor to undertake a much simpler repayment of debt. The amount is limited to a single fixed figure that the third party upon receipt then divides amongst the creditors. With bankruptcy it is still possible for a debtor to be obligated to multiple creditors. Another benefit for debt management plans is that they come with lower interest. Many creditors suspend interest to avoid the case getting to bankruptcy level, lowering the true value of the debtor’s obligation.