Debt Counselling Info

It would be an understatement to say that in recent months the number of individuals and businesses running into financial downturns has increased.  It has, in fact, reached a point that creditors have found themselves inundated with repayment defaults and no hope of recovering any money at all on many accounts.  The fact that bankruptcy filings have recently risen by 40 percent in the US is a clear indicator that many people simply don’t have the money to pay on their debts.

Because of all of this, creditors (particularly credit card companies) are desperate for money and have decided that it is to their advantage to work with their debtors, via credit debt counseling agencies and settlement companies, in order to recover at least some of the money they are owed.  This means that, for consumers trying to eliminate and/or reduce their debt, debt settlement has become a viable option.  If you’re considering this option, you will most likely need to secure the services of a consumer debt counseling agency or debt settlement company.  Unless your creditors are willing to work directly with you, the consumer, AND offer some sort of debt settlement that is to your liking, a debt settlement company is the best way to go.  Their knowledge of the laws and experience in negotiating an acceptable settlement will be a strong benefit.  Our on line sources say a reputable, experienced debt counselor can realistically eliminate up to 60% of your debt and negotiate a reasonable payment schedule for the remainder.  Some online ads for settlement companies claim that they can eliminate 75% to 80% of your debt, however, this is likely inflated and could be a sign of a scam.

Only unsecured debt may be handled in a settlement negotiation.  Student loans and other types of loans using some kind of collateral do not qualify.  The way debt settlement works is fairly straight forward.  You, or a settlement agent on your behalf, negotiates with the debtor to eliminate a portion of the total debt balance and sets up a regular payment schedule for the remainder.

Aside from the fact that a debt counseling agency will do all of the legwork in terms of negotiating with your creditors and filing the appropriate forms, there are several other benefits to using a third party.  First of all, they will immediately put an end to harassing phone calls and pressure from debt collectors.  Secondly, it will prevent some of the embarrassment associated with this type of situation.  Thirdly, you will get some input into making decisions about what you can afford to pay each month for the remainder of your debt.  Most importantly, you are paying them, so they work for you, not the creditor.  A reputable agent will look out for your best interest.

There is one drawback to debt settlement that you should be aware of before you pursue this option.  Your credit score will take a hit when it is all said and done.  The good news, however, is that it will be temporary and not nearly as severe as it would be for a bankruptcy.

There are several things you should be aware of as you begin your quest for a debt counselor.  The first rule for finding a reputable agency is to shop around.  There are literally hundreds, if not thousands, of these companies in existence.  It is important to find one that has been in existence for a number of years and possesses the business ethics and standards that will ensure your financial situation will receive the attention it deserves.  You should always search for an agency that belongs to an established network, like the National Foundation for Credit Counseling or The Association of Settlement Companies.  This will greatly reduce the risk of dishonest business practices.  If you’re lucky enough to find a free debt counseling agency, and they do exist as non-profit organizations, then even better.  You should be careful about these, however.  Check them out thoroughly through the Better Business Bureau or the local Chamber of Commerce.

We will conclude this post by recommending that you take a look at the posts entitled Recognizing the Signs of a Debt Counselling Scam and Locate a Debt Counselling Agency here at this site for more information on what to look for as you embark on your search for a reputable debt counselor.