American consumers' financial problems are not over. There is still nearly $1 trillion in consumer debt outstanding, although many people have paid down some debt. There are still nearly a million personal bankruptcies every year, although the trend is down from the peak. And there are still people who can't refinance their mortgages, either because they don't have enough equity or because they have bad credit.
In other words, there are plenty of people who need help dealing with debt and managing their money. Whether because of job loss, illness, uncovered medical expenses or divorce, there may come a time when you (or someone you love) simply cannot pay the bills. Or perhaps you never learned money management tools and want to avoid debt problems proactively.
That's where credit counseling comes in. You know you need help, but who can you trust? And how can you avoid the rip-offs that prey on people struggling with debt? There are two major associations of credit counseling agencies that you can trust. They are the National Foundation for Credit Counseling (www.NFCC.org or 800-388-2227) and the Financial Counseling Association of America (www.FCAA.org or 866-694-7253).
Each of these organizations has local member agencies that must adhere to the highest standards of credit counseling. And that's where your search for nearby help should start.
Here are five things you should know about credit counseling.
1. Good credit counseling is available at no cost, or a nominal fee. You should not have to add to your debt to get help! Nonprofit organizations train counselors and accredit them. Calling the toll-free number automatically connects you to the nearest local agency, where you can meet in person or get counseling over the phone. Even if you are not in debt, they can offer advice on budgeting, saving and organizing your finances. They also counsel potential homebuyers and those seeking reverse mortgages.
2. Credit counseling may help by creating a debt repayment plan with your creditors. This program may not reduce your debt, but it can make it more bearable through negotiations with your creditors to reduce interest rates and "re-age" your debt. The process is designed to get you out of debt in five years or less. Fees for these plans are reasonable and are often waived or reduced.
3. Credit counseling does not have to impact your credit report. If you just go to a counselor to get debt advice and help getting organized to manage your money, the process will not show up on your credit report. If you enter into a "debt repayment plan" it will be reported to the credit bureaus -- but at least it shows that you are making an effort.
4. Credit counseling helps you avoid bankruptcy. But sometimes bankruptcy is inevitable. If that is the case, most agencies will help you through the process, referring you to competent attorneys who will not make your debt situation worse. The bankruptcy code actually requires you to go through credit counseling from an approved agency before a filing can be made.
5. Most nonprofit credit agencies are subsidized in a small way by major credit grantors. Credit card companies want to avoid the losses associated with bankruptcy, so they support non-profit credit counseling, which enables them to recover some funds that are owed to them.
Good advice is available, but not from those late-night television commercials that promise to "wipe the slate clean" -- for a fee! Start with reputable counseling and you really can turn your life around. That's The Savage Truth.
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