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Credit Counseling
Reputable credit counseling organizations advise you on managing your money and debts, help you develop a budget, and usually offer free educational materials and workshops.
Their counselors are certified and trained in the areas of consumer credit, money and debt management, and budgeting. Counselors discuss your entire financial situation with you, and help you develop a personalized plan to solve your money problems. An initial counseling session typically lasts an hour, with an offer of follow-up sessions.
A reputable credit counseling agency should send you free information about itself and the services it provides without requiring you to provide any details about your situation. If a firm doesn’t do that, consider it a red flag and go elsewhere for help.
Once you’ve developed a list of potential counseling agencies, check them out with your state Attorney General, local consumer protection agency, and Better Business Bureau.
They can tell you if consumers have filed complaints about them. (But even if there are no complaints about them, it’s not a guarantee that they’re legitimate.) The United States Trustee Program also keeps a list of credit counseling agencies that have been approved to provide pre-bankruptcy counseling. After you’ve done your background investigation, it’s time for the most important research -- you should interview the final "candidates."
Here are some question to ask about a credit counseling organization before you commit to working with them:
- What services do you offer?
Look for an organization that offers a range of services, including budget counseling, and savings and debt management classes. Avoid organizations that push a debt management plan (DMP) as your only option before they spend a significant amount of time analyzing your financial situation.
- Do you offer information? Are educational materials available for free?
Avoid organizations that charge for information.
- In addition to helping me solve my immediate problem, will you help me develop a plan for avoiding problems in the future?
- What are your fees? Are there set-up and/or monthly fees?
Get a specific price quote in writing.
- What if I can’t afford to pay your fees or make contributions?
If an organization won’t help you because you can’t afford to pay, look elsewhere for help.
- Will I have a formal written agreement or contract with you?
Don’t sign anything without reading it first. Make sure all verbal promises are in writing.
- Are you licensed to offer your services in my state?
- What are the qualifications of your counselors? Are they accredited or certified by an outside organization? If so, by whom? If not, how are they trained?
Try to use an organization whose counselors are trained by a non-affiliated party.
- What assurance do I have that information about me (including my address, phone number, and financial information) will be kept confidential and secure?
- How are your employees compensated?
Are they paid more if I sign up for certain services, if I pay a fee, or if I make a contribution to your organization? If the answer is yes, consider it a red flag and go elsewhere for help.
If you are considering filing for bankruptcy, you should know that one major change to the bankruptcy law requires you to get credit counseling from a government approved organization within six months before you file for bankruptcy protection. You can find a state-by-state list of government approved credit counseling organizations at U.S. Trustee Program -- List of Credit Counseling Agencies. That is the website of the U.S. Trustee Program, the organization within the U.S. Department of Justice that administers bankruptcy cases.
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