Debt Consolidation -- Choose Your Credit Counselor Carefully
Charles Essmeier
Recently passed by Congress, the Bankruptcy Abuse Prevention and
Consumer Protection Act of 2005 will require people who are
filing for bankruptcy to first undergo mandatory credit
counseling.
This is probably not a bad idea; after all, many
people with problem debt could probably benefit from credit
counseling. A good credit counselor can assist clients with
problem debts in establishing a repayment schedule, creating a
personal budget, and learning how to avoid debt and credit
problems in the future.
The problem is that with the
estimated one and a half million additional people seeking
credit counseling each year, there will undoubtedly be more
credit "counselors" entering the market, and many of them are
only interested in reaping huge profits at the expense of their
clients. There are already a number of credit counseling firms
working in the marketplace that advertise themselves as
"nonprofit", when they actually are closely tied to for-profit
debt consolidation firms. These agencies will strongly encourage
their clients to consolidate debt through their partner company,
and the result may be a long-term loan for the client that
doesn't help them at all, but reaps huge profits for the
consolidation firm. How can someone who is genuinely seeking
legitimate, helpful credit counseling choose a counseling agency
wisely?
*Counselors should listen. If they start pitching a
solution to you during the first fifteen minutes you are there,
you should be suspicious. A credit counselor should be gathering
information about you in order to determine how best to help
you. They can’t possibly know how to help if they don’t
understand your problem. Unless, of course, they don’t care
about your problem and only want to sell generic
“solutions.”
*Watch out for firms that want excessive fees
up front. Be particularly wary of nonprofit agencies that ask
for fees or “voluntary contributions” or nonprofit agencies that
tell you that they cannot help you if you do not pay a fee
upfront.
*Beware of firms that ask for a sizeable fee to
obtain a copy of your credit report. Such agencies should be
able to obtain your report at no charge, and you are entitled to
one report per year for free.
*Sometimes, bankruptcy is
unavoidable. Watch out if the agency doesn’t mention bankruptcy
at all, or if they change the subject if you bring up the topic.
Debt consoldators cannot make any money on bankruptcy cases, but
sometimes, that’s your only option.
*Shop around. Talk to
several different agencies and compare what they tell you. Any
agency that differs dramatically from what the other agencies
are telling you should probably be avoided.
*Check with your
local Better Business Bureau, and ask if they’ve had any
complaints about the agency.
*Watch out for firms that offer
quick solutions to your problems. You didn’t get into financial
trouble overnight, and you won’t get out of financial trouble
overnight. Any competent debt or credit counselor will know this
and will undoubtedly tell you that working your way out of debt
takes time.
*See if the agency belongs to the National
Foundation for Credit Counseling or Association of Independent
Consumer Credit Counseling Agencies. Many do.
By taking a few simple precautions before agreeing to work with a credit counselor, you may save yourself a lot of grief and a lot of money later.
About the author:
©Copyright 2005 by Retro Marketing. Charles Essmeier is the
owner of Retro Marketing, a firm devoted to informational
Websites, including http://www.End-Your-Debt.com
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