Credit counseling - Do You Need A Debt Counselor

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Wedding Ring With Bad Credit
Bad credit personal loans are fast emerging as the most special loans in the American credit market. Bad credit personal loans are specially designed for people with bad credit. There are millions of Americans who are under huge credit card debts. They have either carried high balances or missed out on payments due to many possible reasons. Those reasons could be: lack of experience, illness, unem... Read credit counseling article



Repairing Your Credit - With Or Without Credit Counseling
Debt counseling services are sponsored by most creditors and most are nonprofit organizations, though some are not. You must have a source of income before you can contact a debt counselor service, after which the counselor will often contact your creditors to inform them that you are trying to repay your debt and existing credit loans. The service will then create an agreement that fits within yo... Read credit counseling article



Credit counseling - Do You Need A Debt Counselor
Last year nearly 1.5 million consumers turned to the bankruptcy court system to seek relief from their debts. Much of that debt was consumer debt racked up on credit cards. Medical bills were the second largest cause of debt.

Along with the rise of bankruptcy cases there is a veritable explosion of nonprofit credit counseling agencies seeking to "assist" consumers with their debt management. Unfortunately, the name does not always describe the company these days.

Some state regulators and even the IRS are starting to investigate these counseling companies for fraud and other corporate no-no's.

Example 1: Nonprofit company A is hooked up with for-profit company AA. When a client comes to company A, they pay a "voluntary" fee and then are set up with company AA which makes them a debt consolidation loan. Ergo, no counseling took place, lifestyles did not change, and the consumer will be back in credit card trouble again within a few short years.

Example 2: Nonprofit company C sets up an easy-once-a-month repayment plan for the client. The fee for this plan can range from a small "contribution" to equal to one months repayment amount. Then the company fails to pay the bills on time, or at all, and the client winds up with a worse credit history.

What can you do to protect yourself from these for-profit nonprofits?

Call the Better Business Bureau and see if the credit counseling agency has any complaints lodged against it. Also check out www.nasconet.org the website for National Association of State Charities Officials and find the state agency charged with oversight of charitable groups in your area. Are there any complaints on record?

Don't rush and fail to read your contract and make sure you understand every word. If you don't understand what the contract says, don't sign it.

Get all oral promises in writing, avoid outrageous claims and don't believe claims that creditors settle for less than the full amount owed. Many creditors are requiring more stringent scrutiny of debtors before even reducing interest.

Watch the hustle about "voluntary fees". Either a fee is required, or not. Pay attention to the monthly service charges for the DMP - debt management program. If the non-profit company requires an upfront fee equal to one month's repayment, go somewhere else.

After you do sign up for a DMP, check with your creditors on a regular basis to make sure the company is doing what they promised and paying your bills on time. Even if you are with a debt management program, when the creditor doesn't receive their money, the damage is done to your credit report.

Hopefully, the IRS will soon weed out the bad companies from the legitimate counselors. The time estimate is from a year to more than five, and that's if the companies have not met the letter of the law and are blatantly breaking a law. Until the bad apples are shut down you have to do your homework and find a good counseling organization that will help you set up a budget to ensure that you can afford the repayment program.

When looking for a debt counseling company, I recommend that you go online to www.google.com, and type in Consumer Credit Counseling Service (CCCS) plus your state or city. This will help you narrow your search down to the members of the Consumer Credit Counseling Service in your locality. Also, you can look at www.nfcc.org which is the website for the National Federation of Consumer Counselors, many of whom operate under the label of Consumer Credit Counseling Service. This label is a term used only be accredited agencies who are true non-profit agencies legitimately operating for the good of the debt burdened public.

One final word of warning, if it sounds too good to be true, it probably is. When you seek a consumer counselor to help you set up a debt management program, don't sign anything unless they actually counsel you and help you set up a budget you can live on and still make the monthly payments to pay off your debts.

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Bankruptcy Alternatives

Bankruptcy can have serious, long term effects on your life. If you become bankrupt, you may have to give up valuable possessions and property. Your personal finances will have to be investigated, and restrictions will be placed on future investments.

If you have a steady income and a satisfactory credit rating, you may want to consider these four options with less serious consequences.

Loan consolidation with banks

You may be able to combine all of your debts into one consolidated loan with either your bank or another financial institution. A consolidation loan is always a good idea because your interest rate will be lower than the interest rate on your credit cards, and you will only have to make one payment on your loan each month instead of making many different monthly payments to each of your credit cards.

Informal arrangement with creditors

You could attempt an informal arrangement with your creditors to pay a lesser amount or make your payments over a longer period of time. Often this is done with the help of credit counseling agencies. You may want to discover how your credit rating will be affected before agreeing to such arrangements. Sometimes creditors may agree to reduce your debt or extend the repayment term, but still report you to the credit bureau.

Individual Voluntary Arrangement (IVA)

A third option is an Individual Voluntary Arrangement (IVA). This is a legally binding arrangement between yourself and those you are in debt to. It is Regulated by the Insolvency Act (1986), so you will need the services of a licensed Insolvency Practitioner (IP) to be eligible for an individual voluntary arrangement.

During the set up of your individual voluntary arrangement, your chosen Insolvency Practioner (IP) will draw up legal proposals for you to make an offer in full and final settlement of your debts this could be in the form of a lump sum or regular monthly payments over a period of 5 years.

All interest and charges on your unsecured debts will be frozen. You will be protected from any further action by your creditors. Once the individual voluntary arrangement is successfully completed your debts are effectively written off. The arrangements should be made to the benefit of all those concerned.

The main disadvantage to an IVA is that equity in property may not be completely protected but this is no different from bankruptcy where the Official Receiver retains the right to force a sale up to three years after the bankruptcy.

Credit counseling

A fourth option is credit counseling. There are a number of credit counseling services who will help you consolidate your loans. Before enrolling with a credit counseling service, make sure you inquire about their services and fees. Often credit counseling services are useful in helping you to decide whether bankruptcy is the right option for you.

There are many options to consider when you are in a situation of financial difficulty. Consult with a trustee in bankruptcy, a lawyer, or an accountant for more information.

These are just four options, but many more exist. Talk with a professional before declaring bankruptcy to make sure you have explored all your options.




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Credit counseling - Do You Need A Debt Counselor
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