3 steps to find the right credit counselor

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I get a lot of questions on the bankruptcy law and credit counseling. In short, credit counseling is now mandatory if you are filing for bankruptcy. The consumer's guide to credit counseling is a good read for people filing for bankruptcy as well as for people who are in dire need of credit counseling. It can offer you with tips, resources and information on the subjects of bankruptcy, credit counseling and debt consolidation. It includes tips and practical advise that is applicable to most consumers. My advise will be to read the book before considering credit counseling.



Credit counseling - Keep your debt in check
Before Hibbert Hill left for a study-abroad program in Australia last spring, he signed up for another credit card. One more wouldn't hurt, thought Hill, then a sophomore at Iowa State University. "I didn't plan on using [the card]," says Hill. "But Australia was a blast." The price tag? Over $10,000.

Luckily for Hill and others in his predicament--the average college student carries $2... Read credit counseling article



3 steps to find the right credit counselor
If you might be in a position to file bankruptcy after Oct. 17, or you're interested in credit counseling as an alternative to bankruptcy, you'll want to take the following steps:

Get clear about what you're looking for. If bankruptcy is your best option, you'll want to avoid being routed into a debt-repayment plan you can't afford. If you're trying to avoid bankruptcy, though, a debt-repayment plan might help you stay out of court. Either way, read "The consumer's guide to credit counseling" for an overview of how this industry works and what to expect. If you're not sure whether to file, read the articles in our Bankruptcy Guide Decision Center for more information and consult a bankruptcy attorney about your options.

Choose the format that works for you. If you want personalized help and counseling, make sure the agency you choose offers that. If you already know how you got in trouble and how to avoid it in the future, though, the less personalized approach may be fine.

Go with a proven entity. Stick with agencies affiliated with the NFCC or the Association of Independent Consumer Credit Counseling Agencies. These organizations have fairly rigorous standards for their counselors and affiliates.

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Credit Counseling - Relief Or More Grief

(CBS) With Americans now $700 billion deep in credit card debt, a new and virtually unregulated industry, promising to eliminate that debt, is booming.

And, as CBS News Correspondent Mika Brzezinski reports, in Part 1 of a CBS consumer alert special investigation, the people who promise to help dig you out of debt can just dig you in deeper.

In the commercials it sounds so simple: credit counseling companies promise to eliminate your debt and all you have to do is keep up, "one low monthly payment."

"I did my part," says Romanita Berrios. "I gave them the money every month."

Berrios, a registered nurse, had a perfect credit rating until she was overwhelmed by medical bills after open heart surgery. Then she signed up with Financial Freedom, whose representatives promised to negotiate a lower rate on her credit cards and pay them off.

Instead, she says, they didn't pay any of them.

"Not one," Berrios says.

Attorney Charles Juntika says what clients don't know is that credit counselors get a kickback from the credit card companies.

"The more they can get you to pay, the more they collect," says Juntika. "That's like a collection agency."

But in Berrio's case, they never paid her bills. First interest rates and late fees started piling up, and then she started getting threatening collection calls.

"Financial freedom told me, 'Don't worry about it, you get these calls. Just send them to me,'" she says.

Consumer advocate Travis Plunkett says the boom in consumer debt has created the perfect opportunity for rip off artists.

"You've got the good, the bad and the ugly in the credit counseling industry," he says. "This industry is like the Wild West. Nobody is paying attention (and) almost anything goes."

And certainly no one was paying attention to what happened to Berrios next. Financial Freedom's representatives told her she'd be better served by a company called Debtco and disappeared. Six months into her contract with Debtco, she got a call from a federal marshal. One of her creditors was suing her and her wages were about to be garnished.

"I was scared I was going to lose my pay check," she says. "I thought I was going to lose my apartment. I thought I was going to lose my car. I didn't know what else to do."

Still, Debtco President Nicolas de Segonzac insists that they were saving up to pay off her creditors in a lump sum and she just wasn't patient enough.

"If Ms. Berrios had stayed in the program, she would have been very successful," says Debtco President de Segonzac. "We have ways of talking to the creditors and having them back off from the position they take."

But they didn't, and finally, Berrios walked into the very place she'd gone into credit counseling to avoid in the first place.

"The one thing I didn't want was to go into bankruptcy and that's exactly what happened," she says.

"Berrios was an on-time payer before she went to the credit counselor," says Juntika. "They put Romanita into bankruptcy."

And what happened to the thousands she lost?




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3 steps to find the right credit counselor
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