Credit Counseling Service 101

FAQs on Debt Management Plan

2009-08-25T18:35:00.000-07:00

What is a Debt Management Plan?
A DMP sets up a payment schedule for you to repay your debts. By voluntary agreement, you deposit funds with your credit counseling agency each month. They send those funds directly to your creditors. If collectors call, you can ask them to contact us.

You may also receive a reduction or waiver in finance and/or other charges. When you have completed your payments, we will assist you in reestablishing credit.

DMP serves the dual role of:

Helping you repay your debt.
Helping creditors to receive the money owed to them.

How will a DMP affect my credit?
Your participation in a DMP may change information that is already on your credit report. If your credit report reflects that you have paid creditors as agreed in the past, a DMP could have a negative impact on a creditworthiness decision by a potential creditor, landlord, or employer because it is an indicator that you are or have experienced financial difficulties.

In addition, creditors may report that you are on a DMP and are not paying as originally agreed although they have accepted the reduced payment. Creditors have different credit reporting policies and a certified counselor can answer your questions about the possible effect on your credit rating.

But remember, the goal of the DMP is to develop a plan to ultimately improve your financial and credit standing.

If I enroll in a DMP, can I continue to use my credit cards?
No. As a rule, your creditors will close or suspend your lines of credit. In limited cases (for example if your employer requires you to travel) one credit card may be maintained.

When you complete the DMP, some creditors will reestablish your credit based on your current ability to pay and your payment history while enrolled in the plan.

Will being enrolled in a DMP stop interest from being charged on all accounts?
Your Certified Consumer Credit Counselor will be able to tell you if any of your creditors will consider stopping interest charges. However, the majority of creditors do not stop interest, but many lower the interest.

Can I have only the bills that are causing me problems in a DMP?
For the most effective and equitable treatment of your debts, we need to include all debts in your DMP.

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FAQs on Debt Collection Practices

2009-08-18T18:32:00.000-07:00

What is the Fair Debt Collection Practices Act (FDCPA)?
It's a federal law that protects consumers from harassment or threats made by creditors and prohibits creditors from making false statements. This law also prohibits a debt collector from disclosing what you owe to anyone but your attorney.

What is a "charge off?" If my debt has been "charged off," can a creditor pursue collection?
When an account is considered uncollectable, a creditor will write it off as a bad debt or "charge off." Depending on each creditor's policy, a "charge off" will occur between 90 to 180 days after you become delinquent.

However, a creditor can still pursue collection of the debt after a "charge off" and it will also be reported to the credit bureaus.

My car was repossessed and resold. Am I liable for the difference between what the car sold for and what was owed?
Yes. If not paid, the creditor may initiate legal action for the difference between the sale price of the car and what you owed.

What is a judgment?
A judgment is a decision issued by the court at the end of a lawsuit. If you are sued and either don't file papers or file papers but eventually lose the case, the person who sued you will get a judgment.

Most creditors need a court judgment to attach your wages or put a lien on your property.

My wages have been attached. What does that mean?
When your wages are attached or garnished, a sum of money is deducted from your paycheck and sent to the creditor. Wage attachments are a common method used to collect a court judgment or back owed child support.

Who is responsible for debts after divorce?
You will need to talk to an attorney about this question.

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FAQs on Credit and Counseling

2009-08-11T18:28:00.000-07:00

Credit

How do I establish credit?
You need a steady work record and continued residence at the same address. If you do not have a checking account, open one and be careful not to bounce checks.

You may apply for credit at a local department store or credit union. You might also consider a secured credit card, which requires you to deposit money as security for the charges you make on the card.

Where can I get a copy of my credit report? How much does it cost?
You can get a copy of your credit report by contacting the three major credit reporting agencies. Visit www.annualcreditreport.com to obtain free copies of your credit report.

Can you fix my credit report or clean it up?
No. If negative comments on your credit report are correct, they can remain in your file for up to seven years-except for bankruptcy, which can remain for up to 10 years

If you believe there are errors in your credit report, you must notify the credit bureau in writing. The bureau will follow up your request with your creditor. If the creditor agrees with you, your report will be changed.

Counseling

What happens at my session with a Certified Consumer Credit Counselor?
The counselor will review your financial situation in a non-judgmental manner and provide possible solutions. He/She will help you develop a spending plan that covers your living expenses and payments to your creditors.

Are Consumer Credit Counselors qualified? What are their backgrounds?
Our Consumer Credit Counselors are specially trained and independently certified through Accel eMedia, Inc. They typically have backgrounds in finance and/or counseling.

Is counseling confidential?
Absolutely. Our Certified Consumer Credit Counselors do not discuss a client's financial situation. Client records are maintained in secure facilities.

Can a Certified Consumer Credit Counselor give legal opinions on my options?
No. Only an attorney can provide opinions about legal issues.

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FAQs on Bankruptcy

2009-08-04T18:24:00.000-07:00

What happens if I file bankruptcy?
There are two types of bankruptcy available to most people. If you file Chapter 13, you may keep a mortgaged house or car. Rather than surrender property, you may pay off your debts over three to five years.

Filing bankruptcy under Chapter 7 requires you to surrender all assets that are not exempt in your state. Exempt property may include items such as basic household furnishings and work-related tools.

Both types of bankruptcy may get rid of debts where creditors have no specific rights to property and stop foreclosures, repossessions, garnishments, utility shut-offs, and debt collection activities. Bankruptcy usually does not wipe out child support, alimony, fines, taxes, and some student loan obligations.

How does a DMP program differ from Chapter 13 bankruptcy?
Our DMP is voluntary for both you and your creditors. Therefore, all creditors may not waive interest. However, when you have repaid your debts, our credit recovery program will help you regain your credit.

In contrast, when you file for Chapter 13 bankruptcy, it becomes public record. The court will administer the plan and all interest will be stopped. You may also have difficulty obtaining credit in the future.

How long does a bankruptcy stay on my credit report and how does it affect my credit?
Under the Fair Credit Reporting Act - a federal law - a bankruptcy can remain on your credit report for up to 10 years and won't clean up a bad credit record.

Do I need an attorney to file for bankruptcy?
You are not required to be represented by an attorney, but the advice of an attorney is generally helpful in understanding your rights and the consequences of your bankruptcy case, particularly in light of the recent changes to bankruptcy law. If you decide to file a Chapter 7 or Chapter 13 bankruptcy case, the advice and assistance of an experienced bankruptcy attorney is generally a worthwhile expense.

If I need legal advice on filing bankruptcy, and don't have the money to pay for an attorney, what should I do?
You can contact the local bar association, legal aid services, or a university law school with a legal assistance program for a referral to an attorney.

Can I keep my credit cards after filing?
Whether you will continue to have and use any given credit card account is up to the issuer of the card. Some issuers may permit you to keep your account if you "reaffirm" payment of your debt to the issuer. There may be other alternatives available, such as secured or guaranteed payment cards that function more like debit than credit cards.

Can I be fired for declaring bankruptcy?
The Bankruptcy Code generally prohibits termination of employment or discrimination with respect to employment solely because an individual (1) has filed a bankruptcy case, (2) has been insolvent before the case was filed, or (3) has not paid a discharged debt.

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More Tips on Choosing a Credit Counselling Agency

2009-07-30T18:18:00.000-07:00

Many credit counselling organizations provide valuable advice, education and assistance, but consumers need to be wary of the "quick fixes" offered by some organizations. Consumers can help protect themselves from deceptive credit counselling practices by knowing how to choose a credit counsellor. If you are having a difficult time repaying your debts, a counselling agency may be able to work out a Debt Management Plan for you. Credit counselling agencies negotiate special programs with creditors that are not available to the general public. Choosing an honest reputable credit counselling agency can be one of the most important personal finance decisions of your life. Use the following as a guideline to help you choose wisely.

A trained counsellor will do your budget, including your expenses and income.
They will figure out the total amount of debt you owe and arrive at a figure you can pay each month toward that debt while satisfying your creditors' requirements.
Once all parties agree on the monthly amount required to liquidate your debts, you send that amount to the counselling agency each month. They distribute the funds to your creditors, who have agreed to accept a lower interest rate (and perhaps a lower monthly payment).
The greatest savings you will see by using a credit counselling agency is that they can get creditors to lower or eliminate interest as well as finance charges, and other penalties.
Ask specific questions concerning repayment plans, such as what happens if repayment is more than you can afford and how secure is the information they provide.
Since most registered charitable counselling agencies have to charge a start-up and monthly maintenance fee, find out up front what the cost will be and make sure they put it in writing. Carefully read through any written agreement that a credit counselling organization offers. It should describe the services to be performed; the payment terms for these services, how long it may take to achieve results; any guarantees offered; and the organization's business name and address.
When selecting a credit counselling agency, check with the Better Business Bureau to find out if consumers have filed complaints about the provider you are considering. Most importantly, find out if the issues have been resolved.
Make sure to use a registered charitable organization. A non-profit status alone does not insure that the organization will do a good job, but coupled with fair fees and educational material, it is a good indication of a reliable organization.
Remember that credit counselling agencies cannot erase your credit history. If an agency claims to be able to do so, do not work with them. Under the Credit Reporting Act, accurate information about your accounts can stay on your credit report for up to seven years.
Find out what other sources of funding they receive, who regulates and audits their operation, if their counsellors are trained and by which association, and if there is a formal written agreement.
Ask if you will continue to receive statements from your creditors showing what interest rates you are paying and the reduction of your debt each month.
Make sure that your creditors are willing to work with the agency you choose. If they are, follow up with those creditors regularly to make sure your debt is being paid off.

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Choosing a Qualified Credit Counseling Agency

2009-07-26T18:07:00.000-07:00

To make sure you get quality services from a credit counseling agency, choose wisely. Start by getting referrals from friends and family. Also, check the listings at the National Foundation for Credit Counseling (NFCC) at www.nfcc.org, and the Association of Independent Consumer Credit Counseling Agencies (AICCCA) at www.aiccca.org. Then, make sure the agency meets the following criteria:

Is an accredited nonprofit. At a minimum, any service you choose should be a registered nonprofit. But because some agencies have abused their nonprofit status, you should also be sure the service is accredited. Accreditation will most likely be by the Council on Accreditation (COA) or the International Organization for Standardization (ISO).

Is an NFCC or AICCCA member agency. Members of the National Foundation for Credit Counseling (NFCC) or the Association of Independent Consumer Credit Counseling Agencies (AICCCA) are held to strict quality, financial, and ethical standards.

Employs certified counselors. In addition to completing the agency’s internal training program, credit counselors should be required to pass a certification exam that tests for understanding in areas such as counseling, budgeting, credit and consumer law, debt management, and bankruptcy. The exam should be administered by an independent agency such as the Association for Financial Counseling and Planning Education, the Center for Financial Certifications, the National Association of Certified Credit Counselors, the National Foundation for Credit Counseling, or another qualified organization. If you need counseling for housing issues, such as foreclosure prevention, choose an agency certified by the U.S. Department of Housing and Urban Development (HUD).

Provides substantive counseling and education. The counseling session, whether conducted in person, by phone, or via the Internet, should last approximately one hour and cover your entire financial situation, including income, expenses, debt, the reason for your current financial situation, and your goals. At the end of the session, you should receive a proposed budget plan, a list of next steps, and a presentation of your options. The counselor should provide, or at least offer, free educational materials, the opportunity to attend free money management workshops (if available in your area), and the option for follow-up counseling.

Provides more than one debt management option. Every counseling session should result in more options than just the debt management plan (DMP). Although a DMP can reduce monthly payments, fees, and interest rates for some participants, it is not appropriate for everyone. Beware of any counselor that recommends the DMP before completing a comprehensive counseling session, pushes the DMP as the only option for you, or reveals that he or she is compensated if you sign up for the DMP.

Charges reasonable or no fees. The agency should provide free counseling, or charge only a nominal fee. The fee to establish a DMP should be no more than about $50. The monthly fee for administering the DMP is typically a percentage of your monthly payment. The maximum should be around 10%, not to exceed $50, and the agency should be willing to waive your fees if you can’t afford them.

These fees and the program guidelines should be put in writing. Beware of any organization that pressures you to make “voluntary” contributions or that only includes in the DMP those unsecured creditors that support the agency financially through “fair share” contributions.

Makes up-front disclosures about services, fees, and revenues. If the organization won’t send you general information without first getting your personal and financial information, go elsewhere. In addition to disclosing fees, the agency should disclose its sources of revenue. It should also provide an estimate of how long it will take you to pay off your debts through the DMP, should you choose to participate. If that period exceeds 48 to 60 months, it may not be your best option. During your participation in the DMP, the agency should send you detailed statements (at least quarterly but preferably monthly) showing your payments, disbursements, and estimated balances.

Has a clean business record. Check with the Better Business Bureau and your local consumer protection agency for unresolved complaints against the credit counseling agency. (To find your local consumer protection agency, read Nolo’s article State Consumer Protection Offices.) Also check with your state attorney general for complaints or legal actions against the organization. (You can find your state attorney general office at the National Association of Attorneys General’s website, www.naag.org.) Ask your counselor what the company’s complaint resolution process is. If the company doesn’t have such a process, go elsewhere.

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Tips in Choosing a Credit Counseling Service

2009-07-25T18:02:00.000-07:00

Credit counseling can be a great resource to use to get out of debt. Most people are unaware of how much they spend on a monthly basis, and not having this information can drastically affect their ability to control their savings.

In a society where many operations are based on credit, it does not take much to fall into debt.

Getting a handle on your finances is extremely important, and credit counseling services can help you figure out how to do it. However, it is important for you to understand the services they offer. If the credit counseling service you choose does not have the appropriate services for your needs, you should consider moving elsewhere. Below is a basic list of things that trustees offer:

    * Smaller monthly payments.
    * No more harassing phone calls from creditors demanding payment.
    * Stopped or eliminated interest fees.
    * Money management and debt prevention counseling.

With credit counseling you stand a much greater chance of getting out of debt than you would if you attempted to do it on your own. A credit counseling service will guide you through the entire process to ensure that you complete all of the right steps, and that you fulfill your payments as quickly and feasibly as possible. Be aware that there will be some effects on your credit rating.

Opting to use credit counseling is a personal decision and should be carefully thought out. You should never rush into signing anything with a credit counseling service until you feel completely comfortable. You want to be able to speak freely about your options and concerns. You should not be afraid of asking necessary questions. Being at ease with your credit counseling service of choice is crucial, so if you feel at all uncomfortable, consider consulting with another company.

Researching different companies is highly recommended. You want to ensure that you are receiving the best possible rates available.

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Guide in Choosing a Credit Counseling Service

2009-07-24T17:59:00.000-07:00

If you are worried about your debts spiralling out of control or if your household expenses are getting out of hand, then it may be the right time to find a credit counseling company. Credit counseling companies are designed to help ordinary people like you and me manage, control and get rid of debt. Not only are these companies designed to help you eliminate your debts, but they offer friendly advice on how to keep it to a minimum in the future. Debt elimination is not the only service that credit counseling companies offer. They can also help with bankruptcy, housing counseling and credit reviews.

Some people are wary of going to a credit counseling service for support, they fear the will be ‘told off” or have their wrists slapped for having bad credit, but this simply isn’t the case. A credit counseling service is there to support people lie you, and chances are they have seen people who are in a worse position than you are. Another misconception about credit counseling services is t hat they cost a lot of money, but in fact this couldn’t be further from the truth, as many of these services are completely free.

One of these free organizations are called the “consumer credit counseling services”, and you are likely to find one of these organizations where ever you live. All you need to do is give them a quick call, and one of their representatives will guide you through their process. The only thing they do require you to do is register with them first. You can register with the consumer credit counseling service online, by phone, or simply giving them a visit.

If you find that looking after your finances is difficult at the moment, and you need a little help keeping them in control, then a credit counseling service may be just what you need. In order to find one in your area all you need to do is check out your local telephone book or search online.

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Credit Counseling 101

2009-07-23T17:54:00.000-07:00

So many Americans are up to their eyeballs in debt these days, there is no shortage of counseling services available. How can you find a reputable credit counseling service that won't send you right back to the bank? Or worse yet take you to the cleaners?

Look for the seal. The National Foundation for Credit Counseling, known in many cases as Consumer Credit Counseling Service, is the largest and oldest national non-profit credit counseling network. It sets national accreditation standards for credit counselors, and designs policies that ensure free or low-cost confidential services.

There are also for-profit credit and debt management programs out there, but often they charge a fee to participate.

    * What is credit and debt counseling?

      Counseling sessions — either by phone or in person — can provide education, hope and relief. When you sign up with a counseling service, the service will work with your creditors to either reduce or eliminate your credit card interest rate — something you would not be able to do on your own.

      At your initial counseling session, a counselor will go over your budget with you, looking particularly at your relationship between spending and saving. The counselor will work with you on a feasible payment plan to pay off your debts.

      These counseling centers also offer education sessions on budgeting, money managing, home planning, etc. — value-added services that can save you from traveling down the same road again as you work to get out of debt.

    * Counseling and your credit report

      While many credit and debt counseling services do not necessarily report your participation to credit bureaus, if you already have late or missed credit card payments, this information is most likely already on your credit report.

      Working with a debt management program is likely to improve your record because you will be making consistent, timely payments. However, if you currently have perfect credit, be forewarned that using a service may put a blemish on your report.

      The good news is that it only shows up on your credit report while you are enrolled, unless you declare bankruptcy, which remains on a credit report for up to 10 years. So before you have to go that route, swallow your pride and get out of debt for good.

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