Debt is not always a bad thing. Loans and credit cards allow you to purchase big-ticket items like homes, cars or boats that you cannot afford to pay for in a lump sum. You build up your credit history by borrowing and repaying money. Sometimes, consumers get into trouble with excessive use of credit and cannot repay the debt, but financial counseling gives options to put them back on track.
Description
Credit-counseling firms provide financial counseling for people struggling with their bills. The counseling entails looking at your income, assets and debt, and assessing various options to manage your finances. Financial counseling recommendations run the gamut from money management or budgeting classes to debt negotiation and special repayment plans. Financial counseling is usually affordable because many counseling companies are non-profit and get funding from creditors, according to the Better Business Bureau.
Finding Help
Financial counseling referrals are often available from banks, credit unions, colleges or community extension offices, the Federal Trade Commission advises. The National Foundation for Credit Counseling and the Association of Independent Consumer Credit Counseling Agencies are two professional organizations that provide free online or telephone referrals. You do not necessarily have to find a counselor close to your home because many firms offer online counseling or telephone sessions. Screen counseling firms carefully because some exaggerate their services or charge excessive fees. Ask about licensing and employee training, suggests the BBB.
Repayment Plans
Sometimes financial counseling is not enough to relieve credit and debt problems. Counselors work with creditors to get concessions on your bills, including lower interest and minimum payment requirements, or forgiveness of late payment fees. They then set up and administer your repayment plan, the FTC explains. This clears your debt within a set number of years if you make regular, timely payments. Your creditors may rescind their concessions if you do not pay as agreed.
Bankruptcy Counseling
Federal law requires financial counseling if you opt for bankruptcy. You must work with a financial counselor to explore other potential solutions for your credit and debt problems before you can file your case, advises the FTC. Counseling is mandatory, even if you cannot afford it, as government-approved providers must waive their fees for indigent clients. If you move forward with bankruptcy, you must complete more counseling at the end of the bankruptcy process. This session covers credit and debt management to prepare you for your new start.
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