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
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
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
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.