Debt Counseling—Is It the Answer for You?

Consumer debt is hovering around $2 trillion and millions of Americans are in serious financial trouble; as a result there has been a huge increase in the demand for debt-counseling services. Debt counseling services are usually organizations that are sponsored by most creditors. Most debt counseling services are nonprofit organizations; however, there are a few that will charge a fee. Many universities, military bases, credit unions, housing authorities, and branches of the U.S. Cooperative Extension Service operate non-profit credit counseling programs.

So what can a consumer credit counseling agency do for those that are in need of their services?

• Advise you on managing your money;
• Offer solutions to your current financial problems;
• Develop a personalized plan to help you prevent future difficulties;
• Offer free educational materials and workshops.

What’s included in Debt Counseling?

Debt Counseling is designed to be a process of offering education to consumers about how to avoid incurring future debts. An initial counseling session typically lasts an hour, with follow-up sessions being offered. Most credit counselors offer services through local offices, the Internet, or on the telephone. Our suggestion is to find an organization that offers in-person counseling, as it is more personable. During your consultation, a specialist will develop a manageable budget and repayment plan for you based on your income. Depending on your financial situation, the debt counselor might also suggest various debt relief options such as debt consolidation, or debt settlement. In some instances you might be assigned a counselor that negotiates with your creditors on your behalf to work out an agreement that is within your budget. In some cases if the counselor finds that you are not eligible for any of the above mentioned program, they may ask you to file bankruptcy.

When Choosing a Debt Counselor

► Look for a nonprofit firm

► Find out up front exactly what services you’ll receive, such as counseling, a debt-repayment plan and budgeting advice.

►Ensure they are licensed to provide services in your state of residence

►Find out how counselors are paid—be wary if they are paid on commission based on services that you sign up for.

►Counselors should be certified and trained in the areas of consumer credit, money and debt management, and budgeting.

By helping debtors to manage their finances better, debt counselors are filling a vital role in the economy during the credit crunch. If you are facing financial difficulties, seeking the help of a debt counselor might be a great option for you.