A. Credit and Debt Counseling Agencies
?Credit and debt counseling agencies are organizations funded primarily by major creditors, such as
department stores, credit card companies and banks, who can work with you to help you repay
your debts and improve your financial picture. Many are nonprofit companies, but some are not.
To use a credit or debt counseling agency to help you pay your debts, you must have some disposable income. A counselor contacts your creditors to let them know that you’ve sought assistance and need more time to pay. Based on your income and debts, the counselor, with your creditors, decides on how much you pay. You then make one payment each month to the counseling agency, which in turn pays your creditors. The agency asks the creditors to return a small percentage of the money to fund its work. This arrangement is generally referred to as a debt management program.
Some creditors will make overtures to help you when you’re on a debt management program. But
few creditors will make interest concessions, such as waiving a portion of the accumulated interest to help you repay the principal. More likely, you’ll get late fees dropped and the opportunity to reinstate your credit if you successfully complete a debt management program.
Participating in a credit or debt counseling agency’s debt management program is a little bit like filing for Chapter 13 bankruptcy. (See Chapter 1, Section C.5.) Working with a credit or debt counseling agency has one advantage: no bankruptcy will appear on your credit record.
Taken From : Credit Repair by Attorneys Robin Leonard and Deanne Loonin
