Pros and Cons of Debt Resolution Plans

A debt resolution plan (DRP), also known as a debt resolution program, from MMI is a great way to get out of debt while paying less than what you owe. It’s ideal for consumers who are behind on their payments or simply can’t afford to repay their debts in full.

But like any debt relief solution, there are pros and cons of a debt resolution plan. Consider the following as you compare debt relief options.

Pros of Debt Resolution

When weighing debt resolution program pros and cons, it’s important to understand the key benefits that can make this debt relief option appealing for those struggling with unmanageable debt.

You pay less than what you owe

A debt resolution program is a form of debt settlement. That means that trained debt counselors will negotiate with your creditors to secure a partial repayment of your debts, often as little as 50% of the original amount.

For example, if you owe $10,000 to a creditor, with a DRP you may only have to repay as little as $5,000.

For consumers struggling with monthly payments, who have fallen behind or are about to fall behind, sometimes repaying the full amount just isn’t feasible. The debt resolution plan allows these consumers to finally be free of these lingering debts for an amount that’s more manageable.

Your monthly payments will be more affordable

For most people struggling with debt, it’s not the debt total that’s the problem, it’s the crushing monthly payments. When your debt total spirals out of control, even debt consolidation options like debt management plans and debt consolidation loans may not be affordable because the monthly payments are simply too much to handle.

With a debt resolution plan, because you aren’t repaying your debts in full, the payments are typically much more affordable than your original payments or other consolidation options.

If you’ve been looking for a debt relief solution, but keep walking away with sticker shock at the monthly payment, a DRP may be your best option.

You have a professional advocate to help work with your creditors

If you’re behind on your monthly payments, you’ve probably been hearing from your creditors a lot lately. And while you can try to negotiate a settlement with them directly, that can be stressful and time-consuming.

With a debt resolution plan, your debt counselor does all the hard work for you. They set up your plan and work with your creditors to negotiate your payoff. If a creditor calls, you can simply direct them to MMI and let us handle things.

You can cancel with no penalty

One of the major issues with for-profit debt settlement companies is that they prioritize their fee over your success. Most collect their entire fee after the first creditor payment, so even if you cancel or can’t complete your plan, they still get their full fee.

With a debt resolution plan, fees are only collected as each creditor account is paid off and settled. Our priority is your success, and our fee structure reflects that.

Best of all, if you don’t feel like the DRP is working out, you can cancel at any time and we’ll refund any funds that haven’t been paid to your creditors or collected as fees for successful settlements.

Cons of Debt Resolution

While evaluating debt resolution program pros and cons, it’s equally critical to consider the potential drawbacks. These disadvantages may impact your credit, finances, and overall debt payoff timeline.

Your credit may suffer

Settling an account is bad for your credit. Missing payments is also bad for your credit.

At MMI, we don’t recommend a debt resolution plan for consumers who are current with their debt payments (and can comfortably stay that way) or who can afford other, more credit-friendly debt relief options (like debt management plans, consolidation loans, or balance transfers).

In other words, the best candidate for a DRP is someone who isn’t concerned about their credit, at least not in the short term. Luckily, all credit damage fades with time and being debt-free (and free from debt payments) will make it much easier to rebuild your credit quickly.

You’ll need to be patient

With a debt resolution plan, you’ll make monthly payments to MMI. Those funds will be collected and held while we negotiate with your creditors. Once a settlement agreement is reached with a creditor, we’ll begin making payments on that account.

As a result, there may be a few months where your payments are being collected, but none of your creditors have received a payment. This might make you a little antsy in the beginning, but rest assured it’s a normal part of the process.

You may be sued by your creditors

The toughest part of any settlement is that even if you’re actively engaged in a plan to repay all or some of a debt, creditors and debt collectors may continue their collection efforts. One option that they may decide to pursue is to sue you for the unpaid balance.

The idea of getting sued can be really scary, but the reality often isn’t as difficult as it seems. At MMI, we offer access to optional (and highly recommended) legal support — should a creditor attempt to sue you, pre-paid legal services will be available to guide you through the process and take care of any necessary paperwork.

Bottom line

The best way to know if a debt resolution plan makes sense for your situation is to complete a free online financial analysis. Let us review your debts, income, and expenses and we’ll provide you with personalized recommendations to help you get out of debt and reach your financial goals.

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