Help Desk FAQ

Debt

 

How do I choose a good credit counseling agency?

A credit counselor can teach you important money management skills, work with you to create a reasonable budget, and help you get out of debt. If your debt and income meet certain guidelines, the counselor may offer you the option to pay off your debts through a repayment plan the agency administers (known as a debt management plan, or DMP). Because you would be sending your money to the agency each month and depending on it to pay your creditors as agreed, it’s very important you choose a reputable counseling service. Here are some important things to look for in a credit counseling agency:
  • Non-profit status—Any agency you work with should be a 501(c)(3) non-profit community organization.
  • Accreditation—The agency should be accredited by an organization such as the Council on Accreditation (COA).
  • Membership—Members of the National Foundation for Credit Counseling and the Association of Independent Consumer Credit Counseling Agencies must meet certain quality, financial, and ethical standards.
  • Services—Services should be varied (counseling, classes and materials, for example) and focus on education.
  • Counseling—The counseling appointment should last at least 45-60 minutes and cover your income, expenses, debts and goals. At the end of the appointment, you should receive a personalized action plan and understand your options.
  • Debt Management Plan—A DMP should be offered as an option only if it is in your best interest, is affordable, and achieves your goal to get out of debt in a reasonable amount of time (four years or less). You should be told that the agency may receive funding from the creditors on your DMP, and the plan should include all your unsecured creditors even if they don’t make a contribution to the agency. The full amount of your monthly payment should go to your creditors, with no part going to the agency. You should receive a detailed, written agreement.
  • Fees—Counseling should be free or very low-cost. It should not cost more than $50 to set up a debt management plan. And monthly fees to administer the DMP should be around $25, and not more than $50. Shop around.
If you’re looking for a credit counselor so you can meet the counseling requirement for filing bankruptcy, the U.S. Trustee provides a list of approved agencies.
 

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