Column: Debt management plan can help

Patricia Vaughn of Richmond owed $5,000 to eight creditors. She was a chronic overspender — an addictive behavior associated with her bipolar disorder.

One day she saw a ClearPoint Credit Counseling Solutions announcement that offered to help consumers get con-

trol of their finances.

Skeptical, she contacted the Henrico County-based credit counseling agency and discussed her situation with a financial specialist.

She was told that she could be debt-free in five years if she enrolled in a debt management plan. At the time, “I didn’t see any light at the end of the tunnel,“ she said. “I could not see myself ever coming out of this thing.“

Today, five years after signing up with ClearPoint, and with outside help from a life coach, Vaughn has repaid her creditors. Being practically debt-free became a reality in November.

Vaughn is one of millions of consumers nationwide who, for whatever reason, wind up in a financial mess then enroll in a debt management program to break free of debt.

A debt-management plan is a structured arrangement offered by credit-counseling agencies nationwide. Consumers who join a program make one monthly payment to the agency.

The agency negotiates reduced payments and interest with the consumers’ creditors and pays down their debt.

Consumers who are struggling with debt can find an accredited debt counseling agency through the National Foundation for Credit Counseling at (800) 388-2227, or the Association of Independent Consumer Credit Counseling Agencies at (866) 703-8787.

Both organizations say their members have seen an increase in demand for their services as consumers struggle to pay bills and deal with job losses.

Avoid unscrupulous agencies that charge lots of fees but don’t pay down debt. Check out agencies with the Better Business Bureau at (804) 648-0030.

Patrick Owens, a financial specialist at ClearPoint, said consumers stuck making minimum payments to creditors, or just a bit more, those in danger of losing a job and people whose debt is spiraling out of control might be candidates for a debt management plan.

The sooner consumers recognize that they’re in trouble and come in, the better, Owens said.

ClearPoint’s debt-management program costs up to $35. Counseling is free. It is accredited by both national agencies. Its telephone number is (804) 222-4660.

Credit-counseling agencies are paid a fee by creditors.

Some debt-stressed people may come in and find out that they only need to tweak their budget.

Others need more help but may not get accepted into a debt-management plan. They won’t qualify if they don’t have enough income to make the monthly payment. They also won’t be eligible if they qualify for bankruptcy, have outstanding legal judgments or all their credit-card accounts are at collection agencies.

Consumers who are accepted into a plan repay all the money that they owe to creditors, Owens said. “What we negotiate is a lower interest rate and lower monthly payments.“

When all their debts are paid, “we mark them as an inactive client — and they should be good to go from there.“

Contact Iris Taylor at (804) 649-6349 or .