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
Help organization. Many Debt and 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 Help 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 &
Bill Counseling. 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 Debt Negotiation organizations
can advise you on managing your money and money owing, 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 money owing 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 Consolidation Program: If your
financial problems stem from too much money owing or your
inability to repay your debts, a Debt Couseling agency may
recommend that you enroll in a Debt Relief 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 and 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 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 debt., like your credit card
bills, student loans, and medical debts, 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 Couseling
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 and Credit 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 Help Plan
without teaching you budget and money management skills.
demand that you make payments into a
Debt Consolidation Plan before your creditors have accepted
you into the program
