Debt management is when a third party helps a debtor to repay his/her debts. This also means the the debtor would have to practice the rule of spending less than what they earn. A debt management plan entails the compiling of all creditors and the amounts, that the debtor owes to them. The total amount of the debt is calculated. The debtor's total income (from his/her jobs or any other means) is also calculated as well as their expenditure. Doing this would help the debtor to know what expenditure is a need or what is a want.

The purpose of the debt counselors is to help the debtor to work out a repayment plan with the creditor. The counselors would fabricated a plan that provides payment reduction and interest rate reduction for their clients. In the debt management, the counselors work and abide with the terms of the creditors to ensure that their client payment and interested rates are reduced.

The major advantage of debt counseling is that with the help of the debt management program, the debtor's multiple monthly to be combined into just one payment. At times, the amount is less than the sum of previous payment that the debtor has made. Another importance of a debt management plan is that it helps to reduce the interest rates that the creditor charges the debtor.

The last advantage of debt counseling involve making delinquent accounts to be current. For instance, if a debtor fails to make his or her monthly payments for three months, the creditor will consider the debtor 90 days past due. But when the same debtor joins a debt management program, it would change how creditors view payments. For instance, if this same debtor is late for 90 days, the creditor would not view the account as a delinquent account