![]() ![]() ![]() They must also give you a written contract that clearly explains services to be performed, your obligations including all costs, how long it will take to achieve results, and any guaranteesĭebt negotiation programs claim they can work out a deal with your creditors to lower the amount you owe. They also sometimes make misleading promises to consumers, such as promising to remove a bankruptcy from their credit report, and promising a “new credit identity” to help hide a bad credit history.” Be wary about paying a “credit repair” company up front before they do any work on your behalf.Ĭredit repair organizations must provide you with a copy of “Consumer Credit-File Rights Under State and Federal Law” before you sign a contract. These companies, sometimes called "credit repair clinics," often charge high fees for doing the same things consumers can do on their own. Some consumers turn to companies which claim they can fix credit problems. Federal law requires that you must receive credit counseling from a government-approved organization within six months before you file for any bankruptcy relief. Your creditors may agree to lower your interest rates or waive certain fees if you’re working with a reputable program, but it can still take several years to complete the program.īankruptcy should be your last resort for financial recovery. You deposit money each month with the credit counseling organization, which uses your deposits to pay your unsecured debts, like your credit card bills, student loans, and medical bills, according to a payment schedule the counselor develops with you and your creditors. These programs combine your existing debts into a single loan with a lower interest rate. Also, be aware that just because an organization says it is “nonprofit” doesn’t guarantee that its services are free or affordable.ĭebt consolidation programs offered by legitimate organizations can be helpful to some consumers. The credit counselor should spend at least 20 to 30 minutes with you in order to get a complete picture of your finances. Compare a couple of services and get a feel for how they operate. Think carefully before sending money to a credit counseling or repair program that doesn’t have an office in your community. The National Foundation for Consumer Counseling provides a list of member agencies online at or call 1-80 for a 24-hour automated message with office listings. Trustee Program provides a list of government-approved credit counseling agencies on its website. If you are struggling with debt, there are steps you can take to avoid bankruptcy.Ĭonsult with a legitimate credit counselor who will help you develop a personalized money-management plan. You may overspend, become ill or lose your job, making it difficult to keep up with your bills. Once you've obtained credit, it's easy to be overwhelmed.
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