When you are deep in debt and you want to get out, there is not necessarily a “one size fits all” type solution. Whether you choose to consolidate your debt with a loan or a debt management type plan, make sure that you're informed about which option is best for your unique situation. For some, a debt management plan can be a useful tool.

First of all, debt management plans are only viable for unsecured debt – that is, personal loans, credit cards, etc. They are not the appropriate option for mortgages or car repayments, which are considered secured debt.

What exactly is a debt management plan? Basically, you get set up with a credit counseling agency that works with you to set up a plan to pay off your debt. You and the agency work together to figure out how much you are going to pay off on your debts each month, and you pay the agency that amount. (This can have a negative mark on your FICO score, due to the fact that this will show up as a 3rd party intervention-basically stating that you, the consumer, need assistance to pay off your bills). They pass that amount onto your creditors. The status of your debt will determine how long you'll stay on the plan, but they generally last about three or four years.

This has some pros, and it has some cons. First of all, this can work out to your advantage if your agency can talk to your creditors and convince them to charge you a lower interest rate. But at the end of the day, you still pay the full debt amount back, plus interest. To a creditor, it is less risky for them to have the agency pay, than if you pay them directly. Also, you might be eligible for some fee waivers.

Some creditors have free sponsored debt management organizations, but you must be wary of these. The non-profit credit counseling organizations have a legal obligation to provide you with education and counseling, but the trick is that many of the organizations have fraudulently obtained their non-profit status or misrepresented their business practices to regulators. Many of these organizations will try to take advantage of you and tell you that a debt management plan with them is the only option and some will pressure you into making contributions “voluntarily” as well.

Even more frightening, the Federal Trade Commission has found that some of these organizations have actually swindled their clients – defrauding them and making their problems worse. Make sure that if you go ahead with a debt management plan that you receive a monthly statement of the activity and review it carefully. If the company has made late payments or has missed payments, you suffer just as you would in a normal credit situation. You could end up back at square one.