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Credit and Debt Counseling and repair Agencies PDF Print E-mail
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Saturday, 19 July 2008 11:03
Credit and debt counseling agencies are organizations funded primarily by major creditors, such as department stores, credit card companies and banks, who can work with you to help you repay your debts and improve your financial picture.
Many are nonprofit companies, but some are not. To use a credit or debt counseling agency to help you pay your debts, you must have some disposable income. A counselor contacts your creditors to let them know that you’ve sought assistance and need more time to pay. Based on your income and debts, the counselor, with your creditors, decides on how much you pay. You then make one payment each month to the counseling agency, which in turn pays your creditors. The agency asks the creditors to return a small percentage of the money to fund its work. This arrangement is generally referred
to as a debt management program.
Some creditors will make overtures to help you when you’re on a debt management program. But few creditors will make interest concessions, such as waiving a portion of the accumulated interest to help you repay the principal. More likely, you’ll get late fees dropped and the opportunity to reinstate your credit if you successfully complete a debt management program.

Participating in a credit or debt counselling agency’s debt management program is a little bit like filing for Chapter 13 bankruptcy.
Working with a credit or debt counselling agency has one advantage: no bankruptcy will appear on your credit record. But a debt management program also has two disadvantages when compared to Chapter 13 bankruptcy.
First, if you miss a payment, Chapter 13 protects you from creditors who would otherwise start collection actions. A debt management program has no such protection and any one creditor can pull the plug on your plan. Also, a debt management program plan usually requires that your debts be paid in full. In Chapter 13 bankruptcy, you’re required to pay the value of your nonexempt property, which can mean that you pay only a small fraction of your unsecured debts.
The combination of high consumer debt and easy access to information (the Internet) has led to an explosion in the number of credit and debt counseling agencies ready to offer you help. Some provide limited services, such as budgeting and debt repayment, while others offer a range of services, from debt counseling to financial planning.

When choosing a credit and debt counselling agency, look for a company that is truly a nonprofit. Many for-profit outfits use names that sound like a nonprofit, such as “foundation,” to confuse you.
And your inquiry shouldn’t stop there. Many of the unscrupulous credit and debt counseling companies have nonprofit status. These companies often try to get you to pay “voluntary contributions” up front or pay other fees. At a minimum, always ask about fees before agreeing to give your business to a particular counselor.
Last Updated ( Saturday, 19 July 2008 11:07 )
 

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