Debt management plans (DMPs) are often offered by credit counseling services. With a DMP, you make one payment each month to your credit counseling service. The service then pays your credit card bills, student loans, medical expenses, or other unsecured debts according to a payment schedule they negotiate with your creditors. Counselors may also get creditors to lower interest rates or waive certain fees if you are enrolled in a DMP.
Debt Management: Selecting Your Service
Reputable credit counseling service counselors are certified and trained to help you with consumer credit, money and debt management, and budgeting. While those that bill themselves as “non-profit” have a legal obligation to provide education and counseling at reasonable costs, many organizations have sought non-profit status solely to avoid being subject to certain consumer protection laws. Research your agency carefully before committing to a service or writing any checks.
Credit Counseling: Buyer Beware!
Some sketchy outfits charge high fees (not all of which are disclosed) or pressure you to make “voluntary” contributions for services. If a counselor (nope, make that salesperson) pushes a debt management plan before spending time reviewing your financial situation, just get up and get out–this person cannot be trusted to act in your best interest. The bad guys may offer little or no consumer education and counseling. They may lie about their non-profit status or fraudulently obtain non-profit status by lying about their business practices to regulators.
Checking Out Credit Counselors
You can verify a counseling service’s reliability with your state attorney general, local consumer protection agency, and the Better Business Bureau. They can tell you if consumers have filed complaints about them. You can also see if your service is a member of The American Association of Debt Management Organizations, which is the largest trade group of credit counselors. The United States Trustee Program also keeps a directory of credit counseling services that have been approved to provide required pre-bankruptcy counseling.
After you’ve done your background investigation, the next step is most important–interviewing potential candidates. You will, after all, be discussing your intimate financial details with them–and surveys have shown that many are less comfortable discussing their finances than they are their sex lives! So find someone reputable who you can be honest with, and get the help you need.