Not everyone has the knowledge and discipline to get out of debt by themselves. Many people -- maybe you're one of them -- need someone to take them by the hand and walk them out of debt. There is nothing wrong with this.



My recommendation, if you decide you need some outside help, is that you consider working with a non-profit credit-counseling agency. According to the two major non-profit credit-counseling trade associations -- the National Foundation for Credit Counseling (NFCC) and the Association of Independent Consumer Credit Counseling Agencies (AICCCA) -- some eight million people came to member agencies for help in 2009. So if you need help, trust me, there's no reason to be embarrassed. You've got plenty of company.

Let's take a look at eight ways that a great non-profit credit counselor can help you:1. They Will Offer You a Free Counseling Session.

Before they ask you to sign up for anything, most good nonprofit credit-counseling agencies will spend at least 60 to 90 minutes with you reviewing your entire debt situation and overall financial position FOR FREE. (Some reputable firms do charge an up-front consultation fee, but it's very small-usually less than $100.) A common first question is, What brings you to us today? They may then ask you about your short and long-term goals. The idea of this is to encourage you to think beyond the immediate problem of getting out of debt and start looking forward to a brighter future.

2. They Will Help you Look Closely at Your Financial Reality.

First, they will look at what you earn and your expenses. Then they will look closely at your debt, how much you owe, what kind of interest rates you are paying, and how much you are wasting in late fees and over-the-limit penalties. Based on all this, they can figure out if you might be able to get yourself out of debt simply by changing your financial habits, or if you need to enroll in a Debt Management Plan (DMP).

3. They will Create a Spending Plan or Budget for You.

There's no point in trying to pay down your debt if you don't create a spending plan that allows you to live within your means. Creating this plan or budget is a critical part of what a good non-profit counselor will do for you. They will study where your money is going and make recommendations about where you can and should cut back in order to get your finances under control.

4. They Will Work With You on Secured Debt as Well as Credit Card Debt.

A good counselor will review both your secured debt (where you put up collateral, such as a mortgage) and your unsecured debt (where you don't, such as most credit card debt). The goal will first be to make sure you can buy groceries, keep the lights on, and pay your rent or mortgage. Then they will look at the best way to deal with your credit card debt and other unsecured obligations.

5. They Will Recommend a DMP -- But Only if it Makes Sense for You.

A Debt Management Plan is a payment plan where your credit counselor negotiates with your creditors to work out an arrangement designed to make it possible for you to get out of debt within three to five years. Millions of cash-strapped credit card customers have enrolled in such plans in the last few years. In most cases, a DMP will:

  • Create a three- to five-year plan to get your debt paid off.
  • Lower the interest rate on your debt -- usually to below 10% and sometimes much lower.
  • Get your credit card company to stop charging you over-the-limit fees, annual membership fees, and late payment penalties.
  • Freeze your credit card accounts until your balances are paid off. Some credit card companies will actually close your account and make you apply for a new card once your debt is paid off.

It is important to note that a reputable non-profit won't recommend a DMP to just anyone. According to the National Foundation for Credit Counseling, about one out of every four people is able to sustain a DMP. A DMP can't really help you if you still can't afford to make your payments even after your interest rates are lowered and your penalty fees are waived.

6. They Will Level With You About Your Need to File For Bankruptcy.

According to the NFCC, about 10% of all credit-counseling clients probably should consider bankruptcy. A good credit-counseling agency will let you know right away if you are in that 10%. Under the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005, you're not allowed to file for bankruptcy without first working with an approved credit-counseling agency, and a good agency will provide you with legally required pre-filing counseling. What a good counseling agency won't do is push you to use a particular bankruptcy lawyer. (I talk about finding a good bankruptcy attorney in Chapter 14 of Debt Free for Life).

7. They Will Provide You with References and Testimonials.

Most reputable non-profit credit counselors take great pride in the success stories of their customers -- and they should be willing to provide you with references from people they have helped. If you're considering a credit-counseling agency that wasn't recommended to you by someone you know, ask them for the names of three former clients whose situations were similar to yours and who might be willing to talk about their experiences.

8. They Will Happily Explain Their Fees Up Front.

Any honest, accredited non-profit credit-counseling agency will be happy to explain exactly how much they charge and put it in writing. Many won't charge you anything for the first appointment. In most cases, you will have to pay a monthly fee if you enter a DMP, but this, too, should be nominal -- usually $50 a month or less. If you can't afford to pay, most non-profit consumer counseling organizations will still work with you. Both the NFCC and AICCCA membership guidelines say that consumers cannot be denied service based on inability to pay.

The road to financial freedom can be long and arduous so if you feel that you need some outside guidance to get your finances on track you will need to find the right agency to help you.

To find a reputable credit-counseling agency, contact the NFCC (800-388-2227) or the AICCCA (866-703-8787). If you feel like you may not necessarily need the assistance of a non-profit credit counselor but still want some help to keep you on track while getting out of debt, visit my website finishrich.com for financial info and resources. Also be sure to check out debtwise.com for a do-it-yourself online debt reduction tool I've created with Equifax to help you automate your way out of debt.

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