Do You Need a Debt Counselor?

When you're sick, you seek out a doctor to help you get healthy again. But what if your disease is debt?

It may be time for a session with a certified "money therapist."

Expert help is available in the shape of credit and debt counseling organizations. Debt counseling sounds like a session with a financial shrink, and in a way it is. Except the thing that will shrink is your debt.

How Counselors Work

Credit counseling agencies are non-profit companies that show how to manage your money. They also work with you to form a debt management plan, or DMP. In 1998, more than 1 million people hammered out DMPs with the help of counselor.

Agencies receive their most of their funding from creditors who collect payment after you pay the agency. Agencies will give you information on programs and general information for free. Some agencies charge you for setting up a plan; others offer plans for free. After you've completed the program, the agency will then help you re-establish your credit.

How to Choose the Right
Credit Counselor

So now you are ready for some confidential, financial TLC. Where do you start?, formerly Debt Counselors of America, offers some helpful tips on trying to find a credit counselor:

• Agencies must provide free information on their programs. If they do not, keep looking.
• Find out how counselors are trained and what qualifications they have.
• Make certain your information will be kept confidential.
• Only work with an agency that doesn't demand a specific "minimum" amount of debt.
• Ask which debts the agency will help with, including secured debts, such as car loans and mortgages.
• Ask about hardship programs if you are unable to make the program's minimum payments.
• Try to stick with agencies that don't ask for up-front fees to participate.
• Learn exactly when the agency will pay your creditors.
• Ask what regular reports, such as account statements, the agency provides.

If you decide you need a debt repayment plan, you can expect the following:

• At a meeting with a counselor, you will talk about what you owe and your income.
• Together you'll draw up a budget.
• Next step is setting up a repayment plan.
• The agency will act on your behalf with creditors if you're unable to make the minimum suggested payments.
• You sign an agreement with the agency. You might have to pay participation fees.
• Under your personal debt repayment plan, you pay the agency and they send your payment to your creditors.
• You must make the on-time payments or risk being dropped from the program.

One final note: be wary of fly-by-night agencies that claim "instant credit repair." Steer clear of offers you see advertised on television or magazines that seem to good to be true -- they usually are. You can't buy a new credit history. That has to be earned.

Remember, don't wait until you are seriously in trouble to consider debt counseling. Act now if you're even a bit worried about your spending habits or financial situation. You'll find getting money-management tips from debt counselors is definitely worth it.

To Get Help

Most local agencies go by the familiar CCCS name. The National Foundation for Consumer Credit, the nation's oldest and largest non-profit financial counseling organization, has 1,450 affiliated offices throughout the U.S. In 1999, they helped nearly 2 million families, and more than $2.3 billion in debt was paid down through their repayment programs. To find a local office near you, call (800-388-2227) or visit

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