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 creditors, or can’t keep track
of mounting bills, consider contacting a Debt and 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 Debt &
Bill Counseling 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 Credit
Counseling. Many universities, military bases, credit unions,
housing authorities, and branches of the U.S. Cooperative
Extension Service operate nonprofit Debt & Bill Counseling
programs. Your financial institution, local consumer
protection agency, and friends and family also may be good
sources of information and referrals.
Reputable Debt 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 Program: If your financial
problems stem from too much money owing or your inability to
repay your debts, a Debt and Credit Counseling agency may
recommend that you enroll in a Debt Counseling 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 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 money plan 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 money owing., like your credit
card bills, student loans, and medical debt, according to a
payment schedule the counselor develops with you and your
creditors. 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 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.
Make sure your protected
Be wary of Debt and Credit Counseling
organizations that:
charge high up-front or monthly fees for
enrolling in Credit Counseling 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 Help Plan
without spending time reviewing your financial situation.
offer to enroll you in a Debt Relief
Plan without teaching you budget and money management skills.
demand that you make payments into a
Debt Relief Plan before your creditors have accepted you into
the program
