Debt management

If you are suffering from debt overload you are not the only one out there. In the United States pretty much every household is in some type of debt and most are looking for a way out of the ever growing debt. Because of how many households are looking for ways to manage their debt a new type of business has become quite popular. This business industry would be credit counseling. But the problem with credit counseling organizations is that many of them are being sued by either the Federal Trade Commission or the states Attorney General's office because they are not what they claim to be.

Basically these companies have lied to their customers about various aspects of their businesses including the cost, nature, and benefits of the services that they offered. But not only are the ones getting sued closing their doors, but other companies that are similar to the ones getting sued are closing their doors. But this doesn't mean that all credit counseling organizations are bad. You just need to know what to look for when it comes to this type of business.

What questions you should ask when choosing a credit counselor?

If you are considering a debt management plan then one thing that you are going to need to look into is a credit counselor. The reason that you need to go to a credit counselor is that they can actually provide you with great credit advice and assistance when you are preparing a debt management plan. Here are the questions that you should ask when choosing a credit counselor so that you can find the best counselor for your needs:

What services do you offer?

When finding a company make sure you find one that offers a wide range of services. You also want to make sure that they have counselors who are trained and certified in consumer credit, money and debt management and budgeting. The reason for this is that the counselors should be discussing your financial situation with you and helping you to develop a plan that will solve your current money problems and help you avoid any future money problems. You also want to make sure that they are providing you with other options, not just pushing a debt management plan.

Are you licensed to offer your services in my state?

Pretty much every state requires that an organization registers or obtains a license before offering any credit counseling, debt management plans, or other similar services. Make sure you find out the requirements of your state and only hire an organization that meets your state's requirements.

Do you offer free information?

If the company charges you for information about the nature of their services you want to go elsewhere, there are plenty of organizations that do not charge to tell you about their company.

Will I have a formal written agreement or contract with you?

You never want to agree to participate in a debt management plan over the phone. You want to make sure you get all verbal promises in writing and you also want to make sure that you read all documents carefully before you sign anything. If the company tells you that you must act immediately to get this rate or to sign up you should look elsewhere.

What are the qualifications of your counselors? Are they accredited or certified by an outside organization? If so, which one? If not, how are they trained?

When looking for a company you are going to want to choose one that is not affiliated with creditors and whose people are trained by an outside organization because they will be more loyal to you than your creditors.

Have other consumers been satisfied with the service that they received?

Once you have found a few organizations that suit your needs you are going to want to check them out with your State Attorney General, local consumer protection agency and the Better Business Bureau. The reason for this is these organizations can tell you if the companies have had any complaints filed against them by other consumers. The best thing this can do is to alert you to potential problems, but keep in mind that just because there are no complaints doesn't guarantee that the company is legit.

What are your fees? Are there set-up and/or monthly fees?

You want to make sure that you get detailed price quotes in writing and make sure that you specifically ask if all of the fees that they charge are covered in the quote that you are receiving. If the fees are a problem, meaning you might not be able to pay them, ask if they have some type of program that will waive or reduce the fees due to your circumstances.

How are your employees paid? Are the employees or the organization paid more if I sign up for certain services, pay a fee, or make a contribution to your organization?

This can happen because if employees are paid on commission they might be trying to pressure you into signing up for these extra services. Not to mention the fact that many credit counseling organizations get additional compensation from creditors if you decide to enroll in a debt management program. So you want to make sure that the company you choose is willing to disclose what compensation it receives from creditors, or how their employees are compensated, if they won't willingly disclose this information you should look elsewhere for help.

What do you do to keep personal information about your clients confidential and secure?

This is important because credit counseling organizations handle your most sensitive financial information, including social security number and all account numbers. So you are going to want to make sure that they have safeguards in place to protect the privacy of this information and prevent any misuse of this information.

What should you do if your credit counselor has gone out of business?

One thing that many people do not expect when they are hiring a credit counselor is for that company to go out of business, but the truth of the matter is that all too often these companies go out of business. In most cases if the company is going out of business they should send you a notice stating that they are going out of business and that something else is going happen to your case. One of the things that might happen to your case is that with the notice they might tell you that your case has been transferred to another company or they will tell you that you are going to need to take some sort of action on your end to keep your financial recovery on track. If for any reason a government agency has filed an action against your credit counseling company you will still receive a notice but most likely it will be from a third party. So if you discover that the organization that is handling your debt management plan is going out of business here is what you are going to need to do:

• Contact your bank to stop payment if you are making your debt management plans through automatic withdrawal
  
• Start paying your bills directly to your creditors
  
• Notify your creditors that the organization that was handling your debt management plan is going out of business. You might also want to talk to your creditors about working out a payment plan that you can handle. One thing you can do is to ask them to give you a reduction on your interest rate without a debt management plan
  
• Make sure that you order a copy of your credit report. What you want to do once it arrives is to check for any late payments or even any missed debt management plan payments that might have resulted from the company going out of business. If you do happen to see some late payments that you were unaware you can always contact your creditors to see if they will remove the notation because of what happened. But just make sure that you keep in mind that they don't have to remove that notation

One of the main reasons that you want to do all of this the minute you find out that the company is going out of business is because of how devastating the effects of non-action can be on your credit and to your debt management plan. What you need to realize is that if your payments are late because the company you were working with failed to make the scheduled payments to your creditors it can have the same devastating effect as if you didn't make the scheduled payment to the debt management company. So you want to make sure that you act quickly so that you don't suffer from any of the negative side effects, such as incurring late charges or losing the lower interest rate.