After struggling with debt for a time, you might need assistance from an outside source. Credit counselors can help you evaluate your situation and your options when you find yourself in a substantial amount of debt. In some cases, people seek out credit counselors voluntarily. Those who file for bankruptcy must see them as part of the process.
Credit Counseling Basics
Credit counseling takes many forms, but the basic services are the same. When an individual is in trouble with debt, talking to a credit counselor can help to get their financial situation back under control. Credit counselors often help consumers figure out how to avoid debt in the future, as well as get out of the debt they're currently in. Many credit counselors offer debt management plans as a solution for their clients.
Debt Management Plan
The primary tool used by credit counselors is a debt management plan. Under debt management, the credit counseling service negotiates with the client's creditors. The creditors typically agree to lower interest rates for the accounts. The client can no longer use the accounts or take on any additional credit. The client makes a monthly payment to the counseling service, which uses the money to pay all of the accounts.
Pre-bankruptcy Counseling
If you are considering filing for bankruptcy, you must employ a credit counselor. This is a requirement of the bankruptcy court. You have to provide a certificate showing you are undergoing credit counseling before you can file. The counselor will focus on your options and assure that you understand the impact of filing for bankruptcy. You can also explore alternatives with the credit counselor, such as a debt management plan or debt settlement.
Employing a Counselor
When you decide to go through credit counseling, you can often do so easily and conveniently according to your schedule. Most credit counselors do not require you to appear in person, although this is an option with most. You can also conduct your counseling online or over the phone. The service typically carries costs for the debtor. And if you agree to a debt management plan, you will pay a monthly service fee.
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