Family Debt Counseling

Debt can be an overwhelming burden on a family. In fact, money issues are often cited as the leading cause of divorce, so this is a serious situation that should be addressed quickly. Unfortunately, too many families hide from creditors and ignore mounting bills, digging themselves deeper into a pit of debt and despair with each mounting bill. Credit counseling agencies, both profit and nonprofit, help a family analyze their current indebtedness and figure out how to fix it.

Agencies

The first decision to be made when it comes to family debt counseling is whether to retain the services of a profit or nonprofit agency. The difference is that the profit modeled agency charges a fee for services. This isn't necessarily a bad thing. Some fee-based debt counseling services are legitimate but, as with any purchase, let the buyer beware. It is an industry that has been alleged to contain scammers. While a nonprofit agency charges no fees to the consumer, they are funded by grants and membership fees from creditors who choose to work with them.

Debt Types

Most types of unsecured debt can be addressed with family debt counseling. These would include credit cards, collection agencies, medical, dental, legal, unsecured bank loans, defaulted auto loans (debt remaining after repossession), IRS debt, student loans, and utility bills. It is more difficult for a consumer credit counseling agency to modify payments for secured debt like a house mortgage or car loan. Your counseling session begins with the agency collecting in-depth information about your financial situation.

Tools

The primary tools at the disposal of a debt counseling agency are to negotiate lower interest rates or monthly payment amounts with your creditors. A well established agency already has professional relationships in place with national credit card companies, etc. The client make a single monthly payment to the counseling agency, which they, in turn, parcel out to creditors as per agreement. For profit agencies make money by keeping a percentage of what they collect, much as a debt collection agency would.

Budget Plan

No matter which debt counseling agency you eventually decide to retain, discussion about a family budget plan should begin very early in the proceedings. Developing a feasible budget and sticking to it is the foundation of keeping the same debt snowball situation from happening again. According to BCSAlliance.com, monthly fees for the services of a debt counselor can run from $10 to $140 monthly.