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
& Bill Counseling organization. Many Debt Negotiation
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 Negotiation 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 and Credit Counseling
programs. Your financial institution, local consumer
protection agency, and friends and family also may be good
sources of information and referrals.
Reputable Debt & Bill Counseling
organizations can advise you on managing your money and debts,
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 debt
management, and money plan. 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 Relief Plan: If your financial
problems stem from too much bills or your inability to repay
your debts, a Debt and Credit Counseling agency may recommend
that you enroll in a Debt Help Program (DMP). A DMP alone is
not Debt and Credit Counseling, and DMPs are not for everyone.
You should sign up for one of these plans only after a
certified Debt 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 and Credit Counseling organization
still can help you create a financial 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 debts., like your credit card
bills, student loans, and medical money owing, according to a
payment schedule the counselor develops with you and your
creditors. 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 Debt 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.
Protect Yourself
Be wary of Credit Counseling
organizations that:
charge high up-front or monthly fees for
enrolling in Credit Counseling or a Debt Help 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 Relief
Program without spending time reviewing your financial
situation.
offer to enroll you in a Debt Management
Plans without teaching you budget and money management skills.
demand that you make payments into a
Debt Help Program before your creditors have accepted you into
the program
