Dear Deborah

0 comments Posted on April 27, 2012

Expert Financial Advice

Dear Deborah,

My husband and I are in a financial crisis. He is in the contractor business and was severely impacted by the economic downturn. While we are trying to get caught up on our first and second mortgages, our credit card bills are suffering and the collectors are calling. We have met with Consumer Credit Counseling Services regarding participating in their Debt Management Plan. This would significantly reduce our monthly payments and provide discipline for us. Unfortunately, I don’t know enough about this program.

Is it a good idea? — F & L in Florida

Many families and businesses are experiencing financial problems due to the current economic conditions. Preying on desperate consumers, the airwaves are full of unscrupulous debt settlement companies that promise to get you out of debt fast. They often make promises that seem too good to be true. They cannot “fix” your credit.

1. First and foremost, consumers should work directly with their creditors. After all, the creditors loaned you the money in good faith, expecting you to pay it all back. Call your creditors and explain your circumstances. Can you negotiate lower interest rates or smaller payments? Ignoring the bills or phone calls will not improve your financial situation. It will only make matters worse. 2. If you do need to seek out credit counseling, the counseling agency you consulted with, Consumer Credit Counseling Services (CCCS), is a reputable agency. It is accredited through National Foundation for Credit Counseling (NFCC), a national nonprofit network of agencies at about 850 U.S. locations. Their credit counselors must meet high quality standards and pass counselor certification exams. The network offers help in person, by mail, online, or through their toll-free hotline (1-800-388-2227).

Consumer Credit Counseling Services offers free and confidential budget counseling with NFCC certified counselors. The counselors work with you to analyze your income, monthly expenses, and debts. Be aware that the CCCS Budget Counseling services offered are NOT the same as their Debt Management Program.

The Debt Management Program (DMP) has an initial no-cost credit counseling session to review the current financial situation and look at options. If you decide to enroll in the DMP, your counselor will 1) contact the creditors and negotiate a workable repayment plan and 2) work with creditors to waive over-limit fees and late fees. You, the client, pay a monthly payment through CCCS, often withdrawn from your bank account. The credit counseling agency sends those funds directly to your creditors.
How will a DMP affect your credit? According to the NFCC: “Your participation in a DMP may change information that is already on your credit report. If your credit report reflects that you have paid creditors as agreed in the past, a DMP could have a negative impact on a creditworthiness decision by a potential creditor, landlord, or employer because it is an indicator that you are or have experienced financial difficulties.”

Debt Management Program credit counselors set up ongoing sessions to help you be in charge of your financial situation. The DMP is successfully completed when the debts have been paid off.
Copyright 2011 Deborah Nayrocker. All rights reserved. Permission to reprint required.

Deborah Nayrocker writes on personal money management topics, showing others how to take control of their financial future. An award-winning writer, she is a guest contributor with www.CBN.com and a finance columnist with www.Crosswalk.com.

Deborah is the author of The Art of Debt-Free Living and the Bible study Living a Balanced Financial Life. Her Web site is www.artofdebt-freeliving.com.

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