Credit counseling is often preferable to consulting with a debt attorney in Montgomery County, TX. Debt education is part of the bankruptcy requirements now, and many people like to make an attempt to pay off debt before scheduling an appointment with a Chapter 7 lawyer. Like many options, credit counseling has its pros and cons. Here is what to consider before taking this route:
- How it works: Credit counselors start by organizing your finances. They take a hard look at your household budget, credit reports and debt to find a strategy for improving your financial situation. Depending on how you found yourself in the mess, they will offer solutions based on your situation. There are different approaches depending on whether you are affected by mortgage arrears, student debt or taxes. Budgeting help should be free—beware of any organizations that charge for materials and workshops.
- Debt management plans: One solution offered by credit counselors is a debt management plan. This is not an automatic strategy with credit counseling, and unlike other services, this will likely cost money. It usually involves a setup fee (around $50) plus a monthly fee, in addition to any agreed-upon payments. Once your disposable income is determined, that amount is paid into an account with the credit counseling agency. The debt manager negotiates payment plans with your creditors and distributes the agreed-upon payments from that account.
- Time investment: Credit counseling requires commitment. You cannot leave out expenses just because they are small—that Netflix subscription adds up over time! The initial appointment can take 60 to 90 minutes, so do not schedule it at a time when you will feel rushed. Once you have a budget and plan, you need to follow it and ensure any payments are available in your bank account. Your days of ignoring your financial situation are over once you start credit counseling and a debt management plan. You must put in the time to remain aware of your money.
- It is not just for the desperate: Many people wait until the collectors are at their door before they reach out to a credit counselor. In fact, the best time to consult with them is right when you are having trouble. If you are skipping payments and finding that your months end with too little money, that is when you need help—before it becomes desperate. That way, you can prevent larger problems.
- Accreditation: Just like any financial service, there is a risk of falling victim to a scam. Make sure the credit counseling organization you are considering is accredited by the National Foundation for Credit Counseling and has good feedback from the Better Business Bureau. Be sure to follow your gut, too, and work with a counselor with whom you feel comfortable. The same is true with debt settlement companies—check their accreditation and know they should only charge a fee if you enter a debt management plan.
James R. Jones, Attorney at Law, is a Chapter 7 lawyer serving Montgomery County, TX. To learn more about Chapter 7 bankruptcy and whether it will work for you, call our office today to schedule a consultation.