This is the fourth of a five part series on ‘Getting out of Debt’: Go to Part 1, Go to Part 2,Go to Part 3, Go to Part 4, Go to Part 5.

Credit Counseling Services

Sometimes it does not seem possible to manage the problem of being financially overextended. If you are unable to solve your financial problems alone, counseling services can help you set up a budget and debt payment plan. Nonprofit financial counseling agencies charge little, if anything, for their services. Military bases and industries often hire people who can help you manage your debts. Housing authorities, credit unions, churches, and universities sometimes provide financial counseling.

However, you need to be careful when selecting a credit counseling service. USA Today reported that the number of complaints about credit counselors was 1,480 in 2002, up from 261 complaints in 1998. Check with the Better Business Bureau to see if complaints have been filed against a credit counseling service before you contact the service.

Extension’s Financial Counseling Service

Selected units of Virginia Cooperative Extension have a Volunteer Financial Counseling Service. Client families are assisted in debt management by trained volunteers. All adult family members must take part in the counseling sessions, which usually are held in public meeting rooms at Extension offices, libraries, or schools. Volunteers are trained to help the family develop a workable budget that will enable the family to repay debts and improve its financial security. The volunteers’ primary focus is teaching money management skills. This includes information on:

• Setting up a spending plan
• Contacting creditors for adjustments in repayment
• Putting financial records in order
• Reviewing insurance coverage
• Establishing regular savings based on set goals

If unique problems arise, the volunteers have access to county Extension agents, Extension specialists, and local financial consultants. In other Extension offices, the Extension agent handles credit counseling and group programs. To take advantage of this service, call your local Extension office.

Consumer Credit Counseling Services

The Consumer Credit Counseling Services (CCCS) help individuals or families with serious financial problems through budget planning, money management, and planned debt reduction. CCCS is a local nonprofit organization affiliated with the National Foundation for Consumer Credit, Inc. CCCS is not a lending institution or charity organization. The counseling service is free. However, when the service prepares a debt repayment plan for you, a nominal fee may be charged to help with administrative costs. They may also require automatic withdrawal from your checking account to cover the amount being disbursed. In addition to client fees, local businesses pay the counseling service a fee for collecting the debts clients owe them. For example, if the CCCS counselor collects $20 to pay a debt owed to a bank, in addition to the fee charged to client, the bank pays CCCS a sum (such as $3) for collecting the debt. The CCCS may also be supported by local groups such as the United Way or community minded firms and individuals.

Anyone overburdened by credit obligations can phone, write, or visit a CCCS office. CCCS requires that you complete an application for credit counseling. CCCS will arrange an appointment with a counselor for you. A counselor will review your application. The counselor is qualified to prepare a budget plan that will be given to you and your creditors for approval. The budget plan will outline exactly how each debt will be repaid. The plan usually is all that is required unless there is an emergency or a change in your financial situation. You can return to the counseling service at any time for further advice. They will probably want you to make your payments to them and they will pay your creditors. There is a charge for this service.

Summary

When your debts are high and your monthly income is not enough to cover the payments, take action to solve your problem. Develop a personalized debt payment plan. If you need assistance to set up the plan, contact a financial counselor at one of the counseling services.

Another way of settling your debts is by court provisions. Your debts will be settled by selling your assets when filing Chapter 7 Bankruptcy. Under Chapter 13 Bankruptcy, the wage-earner’s plan, you may keep your assets while paying back your debts. Any form of bankruptcy should be considered the last resort and you would be wise to consult an attorney for counsel.

The road to financial recovery takes total commitment. You have to decide that you want to be debt free. Then you have to discipline yourself to take the necessary action to pay back your debts. Only you can determine if you are willing to make the sacrifices it takes to achieve this goal.

This is the fourth of a five part series on ‘Getting out of Debt’: Go to Part 1, Go to Part 2,Go to Part 3, Go to Part 4, Go to Part 5.