If you are having trouble paying your bills, and you worry about debt collectors, you might want to seek help from a credit counseling organization. These groups provide a variety of services, from helping you develop a budget to collecting payments and distributing them to your creditors. There are many types of credit counseling services, and it is important to make the right decision when choosing a counselor.
Credit Counseling Organizations
Credit counseling organizations look at your whole financial picture and help you work out payment plans with your creditors that work with your budget. Many credit counseling agencies operate as nonprofit organizations. This designation sometimes brings images of charity and assistance to people's minds. However, not all nonprofits are equal. Some nonprofit credit counseling organizations charge high fees and may not have your best interests at heart. You need to research carefully before hiring any credit counselor. Check the Better Business Bureau and your state's attorney general's office to see if a company has a history of serious complaints before you sign up.
Debt Settlement Companies
Debt settlement companies claim that they can help you settle your debts for lower amounts, sometimes pennies on the dollar. You stop paying on your credit cards and instead pay the debt settlement company that amount. They hold that money in an account and when they have enough money, they try to settle with your creditors, one at a time. During this time, your creditors will still continue to try to collect from you by calling repeatedly, and they may even sue you before the settlement takes place. There is no guarantee that your unsecured creditors will accept a lower payoff, so there is considerable risk to these types of plans. In addition, many debt settlement companies charge extremely high fees.
Working It Out on Your Own
You can work out your debts on your own. A creditor can decide to offer you a payment plan the same way that they would offer one to a counselor. You can call the bank or credit card company and ask them for a reduced payment or a reduced interest rate. Many creditors have departments that handle this for their customers who are having financial difficulty. Good record keeping and organization is a must if you choose to do this. You need to keep track of new payment arrangements and who you talked with at the company. Some people have difficulty working with creditors themselves and find it to be emotionally challenging, but if you are up to the task, it is an option for you.
Bankruptcy
Although bankruptcy is not a credit counseling resource by itself, it is an option for anyone who finds themselves deeply in debt and unable to pay. By law, all people who file for bankruptcy must have received financial counseling during the 180 days before they file. This counseling is supposed to provide a debt repayment plan if one can reasonably be completed. A Chapter 7 bankruptcy eliminates most unsecured debts by selling your non-exempt assets and dividing the proceeds among your creditors. Chapter 13 bankruptcy allows you to pay off debts with a court-supervised plan over three to five years, while keeping most of your property.
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