Details for Personal Debt Counseling
You’re knee deep with big debts. You’ve tried budgeting, talking to your creditors as well as other self-help strategies for controlling your debt, and it also just hasn’t done any good. Don’t give up! Don’t stress! Give credit counseling or debt management a try before you ponder on bankruptcy options.
What is Credit Counseling?
- Reputable credit counseling services will do the following:
- Advise you on managing your money and debt
- Help you develop a budget
- Offer free educational materials and workshops
Credit counselors are certified and trained in the aspects of credit rating, money and managing debt and budgeting. Counselors will discuss your whole finances and will help you produce a personalized plan to solve your money problems.
Choosing a Credit Counseling Organization
Most credit counselors offer their services through local offices, the web or on the telephone. Whenever possible, you ought to seek the one that offers in-person counseling. You ought to develop a summary of reputable consumer credit counseling organizations and ask that they supply you free information brochures about their services. The following organizations often offer credit counseling services:
- Colleges and universities
- Military bases
- Credit unions
- Housing authorities
- County or cooperative extension services
Your bank, local consumer protection agency, church, family may be a good source of information and referrals. The US (Bankruptcy) Trustee Program has a list of approved credit counseling agencies in your area. Each state’s Attorney General’s office, local consumer protection agency and Better Business Bureau can give a list of any complaints filed against the agencies on your list.
Be wary! Many credit guidance organizations are nonprofitand offer their services at no cost or for a modest fee. However, you will find for-profit credit counselors that may charge a higher fee as well as others that could bill themselves as “nonprofit” and “free” but require you make an upfront “donation” or “voluntary” contribution.
Questions to Ask
After you’ve narrowed your list of credit counseling agencies, contact your final candidates and ask:
- What services do you provide? You want budget counseling and debt management classes, not debt management plans discussed below
- Will you help me avoid debt problems in the future?
- What are your fees? Are there any upfront or monthly fees? Get it in writing
- What if I can’t afford your fees?
- Will I have a formal written agreement or contract with you? Always read what you sign
- Are you licensed by the state?
- What are your counselors’ qualifications? Are they accredited or certified by an outside organization? If so, by whom? If not, how are they trained? Avoid agencies that train or certify their own counselors
- How will you keep my personal information private?
- How do you compensate your employees? Avoid any agency that pays their employees based on whether they sign you up, pay a fee or make a contribution
Debt Negotiation Programs
Stay clear of credit counseling agencies that promote debt negotiation services! They’re extremely risky and may have a negative impact on your credit report. Many claim to be nonprofit organizations and:
- Guarantee that they can reduce or remove your unsecured debt
- Require substantial monthly fees
- Demand payment of a percentage of savings
- Tell you to stop making payments or communicating with creditors
- Require you to make monthly payments to them, rather than to your creditors
- Claim creditors won’t sue you for nonpayment of unsecured debt
- Promise that using their system won’t have negative impact on your credit report
- Claim that they can remove accurate negative information from your credit report
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