Credit Counseling: If you’re not
disciplined enough to create a workable budget and stick to
it, can’t work out a repayment plan with your debtors, or
can’t keep track of mounting bills, consider contacting a Debt
and Credit Counseling organization. Many Credit Counseling
organizations are nonprofit and work with you to solve your
financial problems. But be aware that, just because an
organization says it’s “nonprofit,” there’s no guarantee that
its services are free, affordable, or even legitimate. In
fact, some Debt and Credit Counseling organizations charge
high fees, which may be hidden, or urge consumers to make
“voluntary” contributions that can cause more debt.
Most credit counselors offer services
through local offices, the Internet, or on the telephone. If
possible, find an organization that offers in-person Debt &
Bill Counseling. Many universities, military bases, credit
unions, housing authorities, and branches of the U.S.
Cooperative Extension Service operate nonprofit Debt
Negotiation programs. Your financial institution, local
consumer protection agency, and friends and family also may be
good sources of information and referrals.
Reputable Debt Help organizations can
advise you on managing your money and bills, help you develop
a budget, and offer free educational materials and workshops.
Their counselors are certified and trained in the areas of
consumer credit, money and debts management, and financial
budget. Counselors discuss your entire financial situation
with you, and help you develop a personalized plan to solve
your money problems. An initial counseling session typically
lasts an hour, with an offer of follow-up sessions.
Debt Help Plan: If your financial
problems stem from too much debts or your inability to repay
your debts, a Debt & Bill Counseling agency may recommend that
you enroll in a Debt Relief Plan (DMP). A DMP alone is not
Credit Counseling, and DMPs are not for everyone. You should
sign up for one of these plans only after a certified Debt
Help has spent time thoroughly reviewing your financial
situation, and has offered you customized advice on managing
your money. Even if a DMP is appropriate for you, a reputable
Debt & Bill Counseling organization still can help you create
a budget and teach you money management skills.
In a DMP, you deposit money each month
with the Debt Help organization, which uses your deposits to
pay your unsecured debts., like your credit card bills,
student loans, and medical money owing, according to a payment
schedule the counselor develops with you and your debtors.
Your creditors may agree to lower your interest rates or waive
certain fees, but check with all your creditors to be sure
they offer the concessions that a Debt Help organization
describes to you. A successful DMP requires you to make
regular, timely payments, and could take 48 months or more to
complete. Ask the Credit Counseling to estimate how long it
will take for you to complete the plan. You may have to agree
not to apply for — or use — any additional credit while you’re
participating in the plan.
Cover Yourself
Be wary of Debt Negotiation
organizations that:
charge high up-front or monthly fees for
enrolling in Debt Couseling or a Debt Management Plans.
pressure you to make “voluntary
contributions,” another name for fees.
won’t send you free information about
the services they provide without requiring you to provide
personal financial information, such as credit card account
numbers, and balances.
try to enroll you in a Debt Relief
Program without spending time reviewing your financial
situation.
offer to enroll you in a Debt Relief
Program without teaching you money plan and money management
skills.
demand that you make payments into a
Debt Help Program before your creditors have accepted you into
the program
