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When you consider your bankruptcy alternatives, credit counseling will be one of the first options you consider
   

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Is Credit Counseling a Worthwhile Bankruptcy Alternative?

 
 

Credit counseling is a worthwhile bankruptcy alternative, but only if you deal with a reputable credit counselor. There are many companies that offer credit repair services, but all they do is take your money and provide no service. Here are some tips for finding a good credit counselor:

  • Find out if the credit counseling agency belongs to a national organization such as the National Foundation for Credit Counseling. Membership in a reputable organization means the credit counseling agency adheres to the highest ethical standards.
  • Contact your local Better Business Bureau. Find out if your agency is a member, and whether or not they have received complaints about the organization.
  • Beware of large up-front fees. If your credit counselor wants you to pay $1,000 to get the process started, don't deal with that organization. Most organizations charge an up front fee of less than $100, and monthly fees for a debt management plan, in addition to the amount you are paying for distribution to your creditors, should not be more than $50 per month.
  • If it sounds too good to be true, it probably is. Some organizations promise they will "fix" a bad credit report. Others may promise to deal with your debts for a small fee. Reputable credit counselors will first help you prepare a budget to determine what you can afford, and then, and only then, will they help you set up a reasonable repayment plan.
  • Does the agency provide a full range of services, or do they just want your money? Most agencies offer credit counseling along with other services, such as counseling for marriage problems, gambling and drug addictions, and other issues. Since debt problems are often related to other problems, a full service agency will be of great benefit to you.
  • Make sure the agency will work with all of your creditors. Creditors will often agree to subsidize the work of the credit counselors in return for payments. Some creditors do not agree to subsidize or provide donations back to the agency. As a result, some agencies may only deal with some creditors. A reputable agency will deal with all of your creditors, even if they don't help subsidize the process, because a complete solution is necessary for you to get a fresh start.

A debt management plan is a good bankruptcy alternative, but only if you understand the process, and deal with a reputable agency.

 


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