Debt and 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 creditors, or
can’t keep track of mounting bills, consider contacting a Debt
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 Credit
Counseling organizations charge high fees, which may be
hidden, or urge consumers to make “voluntary” contributions
that can cause more debts.
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 Counseling programs.
Your financial institution, local consumer protection agency,
and friends and family also may be good sources of information
and referrals.
Reputable 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 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 Program: If your financial
problems stem from too much debts or your inability to repay
your bills, a Debt Help agency may recommend that you enroll
in a Debt Help Program (DMP). A DMP alone is not Debt
Counseling, and DMPs are not for everyone. You should sign up
for one of these plans only after a certified Debt Negotiation
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
Negotiation 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 Negotiation organization, which uses your
deposits to pay your unsecured bills., like your credit card
bills, student loans, and medical debt, 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 and Credit Counseling
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 Help 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 & Bill Counseling
organizations that:
charge high up-front or monthly fees for
enrolling in Debt & Bill Counseling or a Debt Relief Plan.
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
Consolidation Plan without spending time reviewing your
financial situation.
offer to enroll you in a Debt Counseling
Plan without teaching you financial budget and money
management skills.
demand that you make payments into a
Debt Management Plans before your creditors have accepted you
into the program
