Debt Counseling
Q and A's About Debt Counseling Companies

When it comes to obtaining debt counseling, the operative phrase is, “Look before you leap!” That simply means know what you’re getting into before you sign on the dotted line. Check out at least a half a dozen companies. That way you can grasp the differences between the companies and most importantly, determine if debt counseling is the path for you to take. We offer numerous resources to help you make that decision… 

Question: Are Non-Profit Debt Counseling Agencies Funded by the Federal or State Government?
Answer: Absolutely not! And that answer applies to both for profit and non-profit agencies. Our government, (state or federal) does not have any interests in any debt counseling company. These companies go through the same process as any business in terms of obtaining a business license and tax ID.

Question: How Does a Non Profit Debt Counseling Company Make Money If They Don’t Charge Me?
Answer: Their non-profit status does not prevent them from making money; it just puts them in a different tax status than the for profit agencies. Having shared that, they make money from the deals they cut with the creditors. In the simplest form, each payment a person makes to a debt counseling company, a small percentage goes to that company and the balance goes to the creditors.

Question: What Are The Benefits of Non-Profit Debt Counseling?
Answer: First, the counselors work towards finding the cause of the debt problem. This step is important, because debtors who don’t understand how they got into this mess are bound to repeat it. Secondly, they help set up a workable budget, that if followed will put you back on easy street. Thirdly, it is the least damaging to your credit.

Question: What Situation Is Best Suited For Debt Counseling?
Answer: You need to know the facts; a high percentage of people who enter into payment agreements through debt counseling fall through the cracks because they can’t maintain the demanding payments. So the answer to your question would be: people who can afford to make the restructured payment amount.

Question: Are There Any Down Sides To Debt Counseling?
Answer: Actually there are three:

1).  Most lenders usually view enrollment into a debt counseling as equal to filing bankruptcy in terms of how it negatively impacts you credit score

2). Other options, (if you qualify) settle your debts at some type of discount. The percentage could be anywhere from 10% all the way up to 90% and higher. But debt counseling companies rarely negotiate any discount on the debt. If you owe $60k in debt, that’s what you will end up paying if you stick with the program

3). The failure rate for debt counseling is extremely high. The majority of people who sign up into these programs don’t make until the debt is paid off in full.

Question: What Are The Benefits of Debt Counseling?
Answer: There are a number of benefits…

1). Once you enroll creditors will stop hounding you

2). You avoid bankruptcy

3). Most of the time, the interest and penalties cease

4). You make one payment to the agency instead multiple payments to the various creditors

5). The agency deals with your creditors

6). If you complete all of the payments in the program, you will have wiped out your debt.

William Phillips brings a degree in economics and an unwavering passion to help fellow Americans come from under the clutches of debt. He believes that with the right debt advice or debt counseling, anyone can recover from the stresses of being overwhelmed with credit card bills and other debts.