Credit counseling - The counselors come in all varieties, including bad ones

Credit counseling is now required for anybody filing for bankruptcy, but you want to choose wisely. Here are some tips for how you can select a credit counselor that will assist you, instead of helping themselves.

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The new legislation, passed enthusiastically by Both houses of Congress, makes it mandatory that any individual who wishes to apply for bankruptcy must initially sign up for financial counseling. This is a busy, busy time for the credit counseling industry. The credit counseling industry has gotten even better since the passage of new bankruptcy legislation, which became law in late 2005. The credit counseling industry was doing fairly well in the early part of the decade when the economy was doing poorly and a lot of people were encountering money trouble.

Once you have $50,000 in charge card debt and a $20,000 income, you need some help. A poor counseling agency can make your presently bad situation worse. Credit advisors can offer assistance to consumers, and an experienced one can help you handle your financial obligations and give you some assistance that will prevent you from experiencing such severe troubles down the road. The strategy to mandate credit guidance as a prerequisite to bankruptcy court is admirable in that a large number of people don't know how to handle money until the debts are too large.
 

How can you tell a reputable agency from a shoddy one? Following are some good things a financial advisor ought to suggest:

• Analyze your choices. If you can't afford to pay back, could you do it with a bit of debt restructuring? Can you pay your way out of trouble? Occasionally counselors can work with your lenders to set up somewhat more reasonable terms.
• Examining your financial matters for the last several years to see where the problem started. The sources of your debt need to be documented. Some causes of financial problems might be a poor business performance, a drug problem, compulsive shopping, or simply spending more money than you have.
• Create a budget. Help you establish a tough set of money spending rules so that you do not continue to spend more than you have.
• Will they discuss debt relief in court? Watch out for any financial advisor that suggests that they do not steer anyone to bankruptcy. Filing for bankruptcy is a last resort, of course, but occasionally it is something that cannot be avoided.
• These things take a while, and any financial advisor worth his or her salt who is concerned with actually helping you will take the time to determine what's best for you.

What are the harmful things?

• Debt management plans usually have to do with having you pay a recurring sum to the agency, which they, in turn, forward to your creditors after deducting their commissions. Some financial professionals will tell you, after meeting with you for just a few minutes, that they can help you by signing you up for their company's debt management plan. Frequently, counselors don't remit payments on your behalf; they simply keep it all.
• They only want to set up a payment plan. They appear to have little or no interest in your finances or in how you got into trouble.
• Look out for advisors who urge you to quit paying your debts. Refusing to pay your bills may make your creditors a bit more likely to negotiate your debt, it will negatively affect your FICO score and you don't want that.

Taking the time to find the right kind of help is time well spent.