Foreclosure & Alternatives Law
What are Credit Counseling Agencies?
Credit counseling agencies may be able to help you if you are having trouble paying your debts. Credit counseling can be an alternative to filing for bankruptcy. It is also a required step in bankruptcy in some situations. Credit counseling agencies are generally non-profit organizations that provide you with the tools necessary to manage and pay off your debt. Credit counseling is more than a plan to repay your debts, and will include education and counseling to prevent you from getting into debt again in the future.
Some organizations that call themselves credit counseling agencies charge high fees and may not always provide you with the assistance that you need. Therefore, when choosing a credit counseling agency, you should be careful to choose an agency that is approved by the Federal Trade Commission and/or your state’s consumer protection agency. You can also check with your local Better Business Bureau to see if any complaints have been made about the credit counseling agency, and to see if the credit counseling agency is licensed as per the requirements of your state.
Once you have decided to work with a particular credit counseling agency, you should make sure that you carefully read any agreements before signing them. You’ll also need to be aware of any fees that the agency is charging you up front or on a monthly basis, as well as the consequences if you are not able to make your payments as agreed. Once you know all of this information, you can better decide whether to use a particular credit counseling agency.
Typically, a credit counseling agency will help you enter into a debt management plan (DMP) with your creditors, or the people to whom you owe money. Under a DMP, you make certain payments to the credit counseling agency, which then pays the money to your creditors according to a schedule. As a part of this DMP, your creditors might charge a lower interest rate, or waive certain fees.
Once you have entered into a DMP, you should be sure to make your payments to the credit counseling agency as agreed. The credit counseling agency should provide you with a periodic statement that shows how your payments are being applied to your debts. If you are having trouble making the payments that you agreed to, then you should contact your credit counseling agency immediately.
While DMPs make repayment simpler, you will still need to monitor that everything is going according to plan. If you find that the credit counseling agency is not making the payments to your creditors as scheduled, you’ll need to contact your creditors immediately and make arrangements to pay the creditors directly.