Credit counseling and picking a good counselor

Below are a few tips for how you can select a counselor that will help you, instead of helping themselves. Credit assistance is now required for anyone filing for debt relief, but you want to select wisely.

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The credit guidance business has really picked up since the passage of the Bankruptcy Abuse and Consumer Protection Act, which went into effect recently. The new bankruptcy law, passed enthusiastically by Congress, requires that any individual who wishes to file for debt relief must first apply for credit counseling. The credit assistance industry was doing pretty well in the early part of the decade when the nation's economy was doing poorly and a lot of individuals were suffering from financial problems. This is a busy, busy time for the credit assistance industry.

The plan to mandate credit guidance as a prerequisite to debt relief is laudable in that a large number of Americans don't know how to manage money until the debts are too large. Credit advisors can provide help to consumers, and an experienced one can help you manage your debt and give you some guidance that will prevent you from having such severe problems down the road. Once you have $50,000 in credit card debt and a $20,000 income, you must have some help. A bad credit counselor or financial advisor can make your presently bad situation worse.
 

Can anyone tell a responsible agency from a harmful one? Here are some good things a credit counselor ought to suggest:

• Some causes of financial trouble could be a business gone bad, a broken marriage, compulsive shopping, or simply spending beyond your means. Looking over your financial matters for the previous few years to see where the problem began. The sources of your financial trouble need to be found.
• Analyze your choices. Frequently financial advisors can work with the lenders or creditors to establish somewhat more reasonable terms. Can you repay your way out of this situation? If you can't afford to repay, could you do it with a small amount of debt restructuring?
• Establish a budget. Help you establish a regulated set of cash spending rules so that you don't keep spending more money than you have.
• Will the agency suggest filing for bankruptcy? Watch out for any financial professional that suggests that they never steer anyone to file for bankruptcy. Personal bankruptcy is a last resort, to be sure, but occasionally it's necessary.
• These things take a while, and any financial advisor worth her salt who cares about actually helping you will bother to figure out what is best for you.

What are the harmful things an agency might do?

• They seem to have no interest in your cash flow or in how your problems began. The agencies only want to set up a payment plan.
• Not paying your bills may make your lenders a bit more likely to reach an agreement for your debt, it will drastically impact your credit score and you do not want that. Watch out for credit counselors who urge you to quit paying your bills.
• Frequently, advisors don't remit payments in your name; they simply keep it all. A few agencies will tell you, after meeting with you for no more than a couple of minutes, that they can help you by signing you up for their company's debt management plan. Debt management plans generally include having you pay a recurring fee to the agency, which they, in turn, forward to your lenders or creditors after deducting their commissions.

A reputable agency can help you pay down trouble, while a questionable company can make your problems even worse. Do your homework. Take some time and try to choose sensibly.