Debt Counselor Tips
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 have 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.
- 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.
The IRS has begun to weed out the bad companies from the
legitimate counselors. Still, 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 do a search engine search for "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 by 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.
THIS CONTENT IS FOR INFORMATIONAL PURPOSES ONLY. THIS IS IN NO
WAY GIVING ANY LEGAL ADVICE OR REPRESENTATION. THE INFORMATION
CONTAINED HEREIN WAS COMPILED FROM VARIOUS ARTICLES. FOR ANY LEGAL
ADVICE OR REPRESENTATION SEEK YOUR OWN LEGAL COUNSEL.
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