What Are The Benefits Of Credit Debt Counseling?
Credit debt counselling is a procedure that is often used to assist individual debtors with effective debt management through education, financial planning and the utilization of a wide variety of available tools with the intention to eliminate and eventually remove outstanding debt from the credit history. In the United States alone, a huge amount of credit debt is incurred by countless households. As a result, numerous laws have been passed to govern the manner in which credit debt counselling is to be conducted. One such law, known as the Fair Debt Collection Practices Act (FDCPA), makes it illegal for any credit debt counsellor to engage in any type of unfair and deceptive practice.
Under the FDCPA, consumers are protected against abusive or unsavory credit debt counselling practices such as: collecting fees from the consumer without providing any service; advising a consumer to stop making payments on accounts or to cancel the account; advising a consumer to change his or her address; advising a consumer to conceal or not disclose credit information; instructing a consumer to conceal or not disclose any account numbers; advising a consumer to destroy his or her credit report. Any credit counsellor who violates the FDCPA can be fined up to $12,500. Individuals who are not in debt cannot be required to pay any kind of fee for credit debt counselling. However, individuals who are in debt can obtain certain types of other services from a credit counsellor. These services are not legal, but rather a means to an end.
A number of credit debt counselling agencies offer money management workshops to consumers who are in need of assistance in controlling their spending habits. The money management workshops may also include suggestions on how to prevent impulse buying, how to budget money, and how to avoid using credit cards in order to keep a tight lid on your expenses. Money management workshops provided by various credit counsellors are quite helpful because they provide an individual with practical advice on improving one’s money management skills.
Credit counsellors also provide consumers with a debt management plan. The debt management plan is usually a contract between the consumer and the credit counsellor whereby the credit counsellor will set up a payment plan for the consumer based on the debt that the consumer is in debt to. In some cases, a debt management plan may be established directly between the consumer and the credit counsellor. In this case, the debt counsellor would essentially become the money manager for the account. Under the terms of the debt management plan, the counsellor would make payments to the credit counsellor on behalf of the debt-ridden consumer.
The money management plans offered by most credit counsellors are designed for a particular type of account. Many debt solutions are only available for consumers with unsecured debts, whereas some credit counsellors offer financial assessments to all debt clients. The financial assessments are useful in determining what kind of payments a client will be required to make in order to repay a certain amount of debt and to ensure that the client does not incur any new debt. A credit counsellor can use the financial assessment to determine whether a client requires consolidation or settlement of debt as well.
Most debt solutions come in the form of consolidation or settlement. Consolidation occurs when all debts are lumped together into a single account that pays off all of the smaller lenders. Settlement occurs when a portion of the debt is paid off in full while the remaining portion is paid in small increments. Credit counsellors often combine both consolidation and settlement into a single debt management plan.
Once the terms of the consolidation or settlement are decided upon, a credit counselling agency will create a payment plan that will pay the creditors off completely. This is usually done through a lump sum payment which is transferred directly to the creditors. The debt counsellor will ensure that the client maintains a good payment record and that she pays back the money that she owes in a timely manner. In some cases, the counsellor may also be required to negotiate with the creditors in an attempt to obtain a more affordable repayment plan for the client.
Debt can have a significant negative impact on a consumer’s life. Many people end up losing their homes, having their vehicles repossessed and having a high level of stress due to the money management difficulties. Fortunately, there are numerous credit counsellors who are available to assist individuals and families in dealing with debt problems. These professionals can provide many helpful services and implement debt solutions that will help their clients manage their money issues better.