Debt 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 debtors, or can’t keep
track of mounting bills, consider contacting a Debt
Negotiation 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 and Credit
Counseling organizations charge high fees, which may be
hidden, or urge consumers to make “voluntary” contributions
that can cause more money owing.
Most credit counselors offer services
through local offices, the Internet, or on the telephone. If
possible, find an organization that offers in-person Debt
Help. Many universities, military bases, credit unions,
housing authorities, and branches of the U.S. Cooperative
Extension Service operate nonprofit 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 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 money owing
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 Consolidation Plan: If your
financial problems stem from too much debts or your inability
to repay your bills, a Credit Counseling agency may recommend
that you enroll in a Debt Consolidation Plan (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 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 Help 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 Debt Counseling organization, which uses your
deposits to pay your unsecured debts., like your credit card
bills, student loans, and medical debt, 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 & Bill 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 Credit Counseling
organizations that:
charge high up-front or monthly fees for
enrolling in Debt Negotiation or a Debt Counseling 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 Management
Plans without spending time reviewing your financial
situation.
offer to enroll you in a Debt Help
Program without teaching you budget and money management
skills.
demand that you make payments into a
Debt Management Plans before your creditors have accepted you
into the program
