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"Credit Counseling "

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What is credit counseling?

How do you find a reputable credit counseling service?

Credit Counseling FAQ.

Is credit counseling right for you?

Is Credit Counseling Right For You?

     There are two main reasons why credit counseling may be right for you. The first is if you have noticed that you can no longer afford to make your minimum monthly credit card payments and you want to attempt to get a handle on your debt. The second reason is if you are filing for bankruptcy where, under the new law that passed in late 2005, all filers are required to undergo credit counseling prior to filing their case.

     When is credit counseling not right for you? If creditors have already turned your account(s) over to an attorney or they are beginning to file civil lawsuits, credit counseling will not stop the process. Many counselors will tell you that you can take your credit counseling agreement to court in order to show your willingness to pay, but the decision as to whether or not to accept this will be up to the judge. If at all possible, it’s better to get a handle on your debt before it gets to this point. In addition, credit counseling is not for you if you are unemployed and have no way to come up with the money needed to pay your bills. If a realistic budget cannot be set according to what the credit counselor feels will be accepted by the creditors, they may recommend that you file for bankruptcy.

     For your convenience, a timeline is being provided in an effort to explain just how the credit counseling process works.

- Speak with a credit counselor for a free debt analysis.
- Provide your counselor with a list of all of your debts, along with your monthly income.

- The counselor will create a budget, which will include a fixed amount of money that you will put aside into a savings account each month, and ask if you can handle these new terms.

- The counselor will provide you with an estimate on the number of months that it will take for you to be debt free under the terms of this new budget.

- If the terms are acceptable, you will sign an agreement with the credit counseling agency and issue your first payment.

- The credit counseling agency will send a proposal to each of your creditors listed and will begin to disburse your payments to them in accordance with the proposal.

- If all goes well, you will continue to make your payments directly to the credit counselor who will send payments on your behalf to the creditors.

- The last stop on the timeline is you being debt free after all of your payments have been made.

     The best way to know if credit counseling is right for you is to speak with a counselor, undergo a free debt analysis and see if there is any way that you can work out a budget and still pay your debts every month. It is important to understand that you will not be permitted to continue using your credit cards to make new purchases while in a credit counseling program. If you do, most creditors will take notice and drop you from the program immediately, which will put you back to square one. Your interest rates will go back up, your minimum payment will skyrocket once again and you will find that your efforts were baseless. If you enroll in credit counseling, it’s best to destroy all of your credit cards to avoid the temptation of wanting to use them. You should also avoid applying for any new credit while enrolled in credit counseling, which could also result in your being dropped from the program.