Recently on our bankruptcy forum a user asked, “I lost my job several months ago and I am in a financial crisis. I have considered credit counseling, but I have heard some horror stories about unscrupulous business practices. Can a debt consultant or debt negotiator really help?”
Like all businesses, there are some good debt negotiators and there are some who are not so good. Before pursuing any type of debt consultant service it’s important to do your research and make sure you are hiring a company who will do what they advertise.
Credit Counseling and repaying your debts
One of your first options for repaying your debts is credit counseling. Credit counseling agencies can enroll you in a debt management program and help you repay your debts. Although you may repay the lion’s share, if not all of your debt, the agency will help negotiate with your lenders. They will also help you create a debt management program, and assuming you make all of your debt payments in a timely manner, the debt collection calls will stop.
Using a credit counseling company and creating a debt management plan may also offer some benefits for eliminating certain late payment entries on your credit report. Talk to the credit counseling agency to determine what you need to do to start rebuilding your good credit.
Finally, many debtors who have multiple debt obligations from multiple creditors with all of them calling and hassling them for repayment may find that consolidating their payments into a single payment under the debt management plan is a benefit. In some cases, the credit counseling agency is also better able to negotiate lower interest rates or payments which may be less than the original payments owed.
Credit Counseling Companies get a bad name
Unfortunately, there are some credit counseling companies who have been investigated for their unscrupulous business practices. In fact, for years consumers have complained about credit counseling agencies. Investigations have also confirmed that many agencies have charged high upfront fees, have not delivered on certain counseling obligations, have not provided their customers with promised benefits, or have forced users to pay non-refundable or mandatory donations.
Finding the right Credit Counseling Company
So how do you ensure that you find a company who can really help you? According to a recent article by Mitchell Allen in “A Survival Guide to Debt” one of the best ways to ensure you get the right help is to work with agencies accredited by and affiliated with one of the principal credit counseling industry trade groups: the NFCC, the AICCCA , or the AADMO.
Another way to ensure you get the services you need is to ask the right questions. For example, make sure you understand how much of your payments will actually go to servicing your debts. Discuss how much it will cost to set up the program. Also, discuss whether there are other fees, contributions, or payments you will be required to pay to be a part of the debt management program.
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