DEBT CONSOLIDATION SERVICES/CREDIT COUNSELING
People can often face difficulties in paying bills due to job losses, personal or family illnesses or overspending their incomes. They can take steps to deal with their debts on their own, seek information on budgeting and money management in their communities or contact a consumer credit agency for help in managing their finances.
STEPS CONSUMERS CAN TAKE ON THEIR OWN TO HANDLE DEBT
The following is summarized from "Coping with Debt" posted on The Federal Trade Commission (FTC) website (www.consumer.ftc.gov/articles/0150-coping-debt)
The FTC recommends the following steps to help people in debt to help themselves:
- Develop a budget – List household income from all sources and then list all household expenses to track spending patterns and prioritize necessary items: food, mortgage or rent, education, health care, insurance, etc.
- Contact creditors immediately to try to work out a modified payment plan to reduce payments to a more manageable level. Don’t wait until their accounts have been turned over to a debt collector.
- Check the local public library for information on budgeting and money management.
- Credit debts can be consolidated through a second mortgage or home equity line of credit. However, these consolidation loans require using the debtor’s home as collateral and the home could be lost if loan payments are late or unpaid.
- Know your rights when dealing with debt collectors – Debt collectors may not harass debtors, make false statements, or use unfair practices in collecting debts. They must also honor written requests from debtors to cease further contact.
DEBT MANAGEMENT PROGRAMS
Free or low-cost programs offering assistance with
budgeting and money management may be available through
community action agencies, military bases, colleges,
public utilities, towns, or other community
institutions. DebtConsolidation.com offers advice
and recommendations for consumers who are searching for
a financial counseling service as well as informative
articles on debt management. (www.debtconsolidation.com/)
CONSUMER CREDIT COUNSELING AGENCIES
Consumer credit counseling agencies offer budget
planning, debt management, credit counseling, credit
history assistance and debt consolidation services. They
can negotiate with creditors on behalf of clients to
establish payment plans. Credit card and other consumer
debts are consolidated into one monthly payment with the
agency’s service fee included in the payment. As part of
the repayment plan, clients may need to agree that they
will not apply for credit or use any additional credit
while they are participating in the payment plan
program. In Connecticut, consumers can contact the
following nonprofit consumer credit counseling agencies:
-Financial Counselors of America (www.financialcounselors.org)
-Money Management International (www.moneymanagement.org/)
CHOOSING A CONSUMER CREDIT COUNSELING AGENCY
The Better Business Bureau (BBB) advises consumers to take time to research their options before selecting a credit counseling agency. Questions to ask include:
- Is the agency licensed and accredited?
- Have there been any complaints filed against the agency?
- Are the counselors qualified to give consumer credit advice?
- Are services personalized for each client?
- Is the client's credit information kept confidential?
- Does the agency fully disclose all fees and services in writing?
Further information can be found at "BBBTips on Choosing a Credit Counseling Agency" posted on the BBB website: (www.bbb.org/us/article/tips-on-choosing-an-credit-counseling-agency-6104)
AVOIDING CREDIT REPAIR SCAMS
There are many questionable businesses that offer
"credit repair". They promise to "fix" credit reports
for fees of hundreds or thousands of dollars. Consumers
should know that they can access information to their
credit reports at no charge by contacting the three
credit bureaus. (For details, see the e-Library paper:
Credit Bureaus/Credit Reports). Further
information can be found in the article, "Spotting
Credit Repair Scams and Correct Your Credit History
Yourself" posted on the website of the State of
Connecticut Office of the Attorney General: (www.ct.gov/ag/cwp/view.asp?A=2066&Q=292384&pp=12&n=1)
TO FIND PROVIDERS IN CONNECTICUT'S COMMUNITY RESOURCES DATABASE:
Search by service names:
- Credit Counseling
- Debt Consolidation Services
- Financial Management Workshops
- Personal Financial Counseling
SOURCES: Attorney General, State of
Connecticut Office of the website; Better Business
Bureau website; Federal Trade Commission website;
PREPARED BY: 211/pt
CONTENT LAST MODIFIED: July2014