Credit Counseling: If you’re not
disciplined enough to create a workable money plan and stick
to it, can’t work out a repayment plan with your creditors, or
can’t keep track of mounting bills, consider contacting a Debt
Help organization. Many Debt Help 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 & Bill
Counseling organizations charge high fees, which may be
hidden, or urge consumers to make “voluntary” contributions
that can cause more bills.
Most credit counselors offer services
through local offices, the Internet, or on the telephone. If
possible, find an organization that offers in-person Debt
Negotiation. Many universities, military bases, credit unions,
housing authorities, and branches of the U.S. Cooperative
Extension Service operate nonprofit Debt Help programs. Your
financial institution, local consumer protection agency, and
friends and family also may be good sources of information and
referrals.
Reputable Debt and Credit Counseling
organizations can advise you on managing your money and debt,
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 Management Plans: If your financial
problems stem from too much bills or your inability to repay
your bills, a Credit Counseling agency may recommend that you
enroll in a Debt Consolidation Program (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
Credit Counseling 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 money plan and teach you money management skills.
In a DMP, you deposit money each month
with the Credit Counseling organization, which uses your
deposits to pay your unsecured money owing., like your credit
card bills, student loans, and medical debts, according to a
payment schedule the counselor develops with you and your
debtors. Your debtors 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 Negotiation
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 Debt Negotiation 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 and Credit Counseling or a Debt
Consolidation Program.
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 Help Program
without spending time reviewing your financial situation.
offer to enroll you in a Debt Help Plan
without teaching you financial budget and money management
skills.
demand that you make payments into a
Debt Counseling Plan before your creditors have accepted you
into the program
