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