Debt management skills are in great demand at the present time, especially for numerous consumers who find themselves buried beneath a mountain of credit card and other unsecured debt. Debt problems such as these can take on a life of their own and grow to nightmarish proportions when not managed appropriately. Beyond the sobering financial consequences they can exact, debt problems can also disrupt the personal lives of those involved and eventually assume “center stage” among their priorities. Before a debt problem has a chance to develop into an issue of this magnitude, consumers are well-advised to seek out possible solutions and to consider them carefully, finding the one that makes the most sense for their particular needs and circumstances. Along the way to finding the right debt solution, they are almost certain to encounter some well-worn myths. It is hoped that in exposing them here, it will help readers to sidestep them and to move on to other solutions that are actually worthy of their consideration. Here are some of the most often repeated myths:

1. A debt management plan (DMP) through a credit counseling agency will help to reduce all your debt payments.

Credit counseling can be a very effective debt solution, especially so when it is paired with a DMP. Enrolling in a DMP reduces interest rates, stops over-limit and late fees, allows a consolidated monthly payment and brings an end to collection phone calls. You can also expect that your credit score will be protected. The actual financial counseling that is part of credit counseling can be invaluable and can provide a fresh perspective to the situation. However there are limits to the benefits that you will receive from a DMP. The most notable of these limits is that only unsecured debt (such as credit cards and personal loans) can be included, so you’ll get no interest rate reductions on your mortgages, auto loans or other secured debt.

2. Refinance your home or take out a home equity line of credit (HELOC) to pay off your high interest unsecured debt at lower rates.

At first glance this may seem like a very attractive option to pursue. You can effectively reduce the interest rates you are paying on your unsecured debt and perhaps even benefit from any tax deductions that may apply to the mortgage-related interest payments. But upon closer scrutiny there are some quite serious drawbacks to this plan. First and foremost, it involves turning your unsecured debt into secured debt. In a worst-case scenario, getting behind with your unsecured debt could only damage your credit. If this debt is instead secured by your home, however, your home is now at risk as well as your credit. You’ve got to be absolutely certain that the increased mortgage or HELOC payment doesn’t pose a risk of this kind to you. Of course if you can refinance at a much lower rate that will keep your payment the same or lower, even with the additional principal, then this becomes an option worth considering. Just keep in mind that qualifying for a mortgage these days is far more difficult than it was just a few years ago.

3. File Chapter 7 bankruptcy, wipe out your debt and just start over.

The bankruptcy laws changed in 2005 with the intention of preventing consumers from abusing the system. There is now a 2-part “means test” that must be passed in order to qualify for a “fresh start” Chapter 7 bankruptcy. Those who don’t pass the test will have to file Chapter 13 instead, which is a court-determined repayment plan lasting for up to 5 years. Bankruptcy has such serious consequences on your credit that if you are going to enter a repayment plan, you would do well to also consider a DMP alongside as another possibility. It will protect your credit score, while bankruptcy will ruin your credit for 7 to 10 years. Even consumers filing bankruptcy must now attend a credit counseling session in the 6 months prior to applying, so you should have ample opportunity to explore the DMP option.

About the Author: Alan Winkler is a writer for RightStartllc’s blog, where he sheds light on the debt relief industry. He provides helpful debt advice and tips and regularly writes educational articles on the various debt solutions out there.