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Debt Help

Credit Counseling

11th November 2009

There are those who refer to credit counseling as debt counseling. It is the same thing so do not get confused. Mostly it is in the United Kingdom and South Africa where they refer to it as debt counseling. What is credit counseling anyway? It involves educating consumers on how to avoid taking on debt that they cannot repay in the long run and help them solve their debt problems they face. Debt counselors will teach you how to manage your finances and stay out of the debt trap.

Debt Help Most debt counselors will work with you to create a plan suitable to your financial needs. Also one of the most common remedial actions the debt counselors enforce is to close your accounts and stop them from acquiring any further charges. The debt consolidators also offer you a consolidation plan which involves putting all your monthly payments into one repayment and this one payment usually is less than the sum of the individual repayments of the debts you have been paying. When you are working with debt counselors they will put you on a debt management plan or a DMP and because of this credit card banks will accept a lower monthly payment from a client in a DMP.

Another advantage of being in a DMP is that the interest rates charged by creditors can be reduced. When a client is in a debt management program (DMP) with credit counseling agencies they also benefit from a process called reaging. Reaging is simply the process of bringing troubled accounts up to date and making those accounts current. This involves making some on-time payments as a show of good faith while in the debt management program.

There are trade organizations that govern the credit counseling industry and there are three major institutions which are:

The National Foundation for Credit Counseling (NFCC) which was formed in 1951. The second organization formed in 1993 was the Association of Independent Consumer Credit Counseling Agencies (AICCCA). The third organization to be formed which is the credit counseling industry's largest is the American Association of Debt Managment Organizations (AADMO).

In 2005 the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 made credit counseling a requirement for consumer debtors who file for bankruptcy in the U.S. Not all credit counseling agencies are registered or belong to trade organizations and they are not required to be. What this means for you is that when you seek the help of credit counseling agencies rather do business with those that are registered with one of the three credit counseling organizations.

"If a person gets his attitude toward money straight, it will help straighten out almost every other area in his life. " - Billy Graham

Comments (2):

Andy Says: Very relevant article. Thanks Kev | 11.11.2009 |

Justin Says: Given the current financial crisis and lots of us losing our jobs I think credit counseling is no longer an option but a must | 11.11.2009 |


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