Nonprofit debt relief organizations, or credit counseling services, work with consumers and their creditors to develop affordable debt repayment programs based on monthly income and expenses. Fees for services may be based on a sliding scale or consumers' ability to pay. Nonprofit debt relief organizations cannot typically reduce debt amounts, but they may negotiate waivers or reductions of fees and finance charges.
Scams to Avoid
Do not accept unsolicited offers of debt help, and do not pay for services in advance. Avoid any organization that promises instant credit repair or guarantees immediate results.
Debt Relief Plan
Nonprofit debt relief organizations require full disclosure of all income, expenses and credit accounts. Based on this information, they negotiate an affordable debt repayment plan with your creditors.
Reduced Finance Charges
Debt relief plans may include waivers or reductions of late fees, overlimit fees, membership fees and finance charges on accounts. This helps you pay off your debts faster.
Closed Accounts
Terms and conditions of debt relief plans typically require you to close all credit card accounts and agree not to open new accounts during the completion of your debt relief plan. Failure to comply can result in termination of your debt relief plan.
Credit Report Information
Debt relief organizations cannot "fix" negative credit reporting that occurred before your arranged your debt relief plan. Payments made according to your repayment plan are typically reported to credit bureaus as "paid as agreed."
Debt Management
A key aspect of getting out of debt is understanding how you got into debt and how to avoid repeating past mistakes. Your debt relief counselor will help you develop and learn to live on a cash-based budget that includes saving for emergencies.
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