Debt Negotiation: If you’re not disciplined
enough to create a workable budget 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 Credit 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 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 Credit
Counseling. 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 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 debt 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 Program: If your
financial problems stem from too much debts or your inability
to repay your debt, a Credit Counseling agency may recommend
that you enroll in a Debt Counseling Plan (DMP). A DMP alone
is not Debt & Bill Counseling, and DMPs are not for everyone.
You should sign up for one of these plans only after a
certified Debt Couseling 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 Credit Counseling 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 & Bill Counseling organization, which uses your
deposits to pay your unsecured bills., like your credit card
bills, student loans, and medical debts, 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 & 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 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.
Make sure your protected
Be wary of Credit Counseling
organizations that:
charge high up-front or monthly fees for
enrolling in Debt & Bill 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
Consolidation Program without teaching you budget and money
management skills.
demand that you make payments into a
Debt Relief Program before your creditors have accepted you
into the program
