Do You Have Too Much Debt?
If you are unable to pay your bills at the end of the month and are considering bankruptcy, there may be an alternative. There are non-profit credit counseling agencies across the country that can help you determine if you can repay your debts.
How does credit counseling work?
A counselor will examine ways to solve your current financial
problems and help you develop a spending plan that covers both
your living expenses and payments to creditors. Their sessions
should be confidential and often are available at no charge.
What is a debt management plan?
If you have sufficient funds, a credit counselor may suggest that you enroll in can work out a debt repayment management plan. These plans would require that you deposit money each month with the credit counseling agency. Your deposits are used to pay creditors according to a payment schedule that the counselor develops with you. The credit counseling agency would work with your creditors to reduce the amount you owe or the interest rate you have to pay. However, all your creditors may not participate; you would have to pay those creditors separately.
How do I choose a credit counseling agency?
You will want to ask some basic questions to be sure you are
dealing with a reputable agency.
Q: How much will these services cost?
A: In some cases, there is no charge. An average fee is about $15.00. Avoid companies that claim that they are "not-for-profit" but want a "donation" or substantial monthly fees. Beware of any company that claims it can remove accurate negative information from your credit reports. Always get a signed contract that explains your costs and what the company promises to do for you.
Q: What consumer education or individual counseling do you provide?
A: You need to work with an company that does more than just want to sign you up for a debt management plan. Some companies provide free group financial education workshops or individual counseling over the telephone.
Q: Who regulates the credit counseling service?
A: The government agency which regulates credit counseling services will vary from state to state. You should check with your state Attorney General or consumer protection agency to see if any complaints have been filed against the company.
Q:How are your counselors trained and certified?
A: The National Foundation for Credit Counseling requires that its member agencies certify their counselors through their organization. Counselors may also be certified through the Association for Financial Counseling and Planning Education's Accredited Financial Counselor exams.
Q: Will the counselor help me avoid money problems in the future?
A: Your counselor can help you work out a customized budget to manage your money more effectively. Go with a company that will help you develop a personal plan to avoid financial problems in the future.
AARP Resources
 |
Because your Money Matters, get more tips and action steps on Restoring Credit - PDF file |
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Because your Money Matters, get more tips and action steps on Managing Debt - PDF file |
- Credit Repair Firms Often Fix Nothing
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Some credit repair companies promise to help you dig out of debt but may bury you deeper.
URL: http://www.aarp.org/bulletin
Additional Resources
- Federal Trade Commission
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The Federal Trade Commission has detailed information on choosing a
credit counselor.
URL: http://www.ftc.gov/bcp/conline/pubs/credit/fiscal.htm
- National Foundation for Credit Counseling
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This nationwide organization has local non-profit credit
counseling agencies where you can go to have a face-to-face
counseling session.
URL: http://www.nfcc.org
- US Trustee Program
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The United States Trustee Program also keeps a list of credit counseling agencies that have been approved to provide pre-bankruptcy counseling. Even if you are not considering bankruptcy, you may want to consider contacting one of these agencies.
URL: http://www.usdoj.gov
