By LaToya Irby, About.com Guide Consumer credit counseling is an alternative to filing bankruptcy. It is professional counseling that provides you with financial education and debt counseling according to your situation.
Once you consult with a credit counselor, the counselor will assess your debt level and work out a payment plan based on your income. Some credit counselors can negotiate lower interest rates and set up a debt management plan with your creditors.
The credit counselor analyzes your credit situation including number of accounts, balance, minimum payment, balance due, and any past due account. The counselor then considers your monthly income and bills. Using this information, the counselor puts together a debt management plan (DMP) for paying off your debts. The proposed plan is sent to each of your creditors for approval.
Once your creditors agree to the DMP proposed by your counselor, you begin making payments to the credit counseling agency. The credit counselor disburses payment to each of your creditors in accordance with the DMP. In most cases, your credit accounts are closed to future charges as long as you are on the DMP.
Costs
A lot of credit counseling agencies claim to be non-profit. Even if the credit counseling agency says it’s non-profit, that doesn’t mean the services provided to you are free. In many cases there’s some kind of fee involved. Some agencies use your first payment to cover their fees, while others deduct a flat amount from your monthly payment. ...
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