Definition

• A debt manager usually refers to a debt management company, specifically to the caseworker the company assigns to work with you. These workers collect money you'd normally pay your creditors and then distribute it to those creditors on your behalf. They also teach you how to manage your funds and help you set up a repayment plan. Often, a debt manager works with your creditors to negotiate better deals, like reduced interest or forgiveness of some of what you owe.
  
  Less commonly, the term "debt manager" may refer to software and other tools designed to aid with finances. These tools let you set up automatic payments, track spending, establish a budget and calculate how much you'd save under different repayment methods.
  
  

Advantages

• Debt managers reduce the stress that comes from having many different payments. You do not have to worry about as much hassle from your creditors, as the debt manager will correspond with creditors for you. You also can save money and preserve your credit rating, since consistent payments by a debt manager on your behalf reduces late fees and other penalties.
  
  

Disadvantages

• Using a debt manager isn't free. Most debt management companies charge monthly fees for the work they do, unless they are nonprofit. If you're already in need of a debt manager, you likely don't have a lot of extra cash to put toward debt manager fees. Debt management can make your debt situation worse. Debt managers don't do anything you cannot do on your own. You have to decide whether it is worth the money to have someone act as your middleman. Creditors also participate voluntarily, so you may not be able to include all your debts in your debt management plan. Using a debt manager shows up negatively on your credit report, which can negate the increase in your score that results from more consistent payments. Debt managers can and do make occasional errors. If they don't distribute your payments properly, you can incur fees and penalties and will have to straighten out the mistakes.
  
  

Who Should Use Debt Managers

• Debt managers are best applied to those who have large amounts of debt and who struggle to stay organized financially. Use debt managers only if your income is stable, as you have to be able to cover the original debts, in addition to any fees the manager charges. Don't use a debt manager if your debts are fairly small and can be paid off relatively quickly. You also should avoid debt management if you've already tried negotiating with creditors. Creditors don't give debt managers any better deals than they would give directly to you.