Consolidated Debt How it Works and What to Be Aware of!

Consolidate your debts to have one easy payment and one low monthly interest rate. That’s what the commercials say. Helps your credit, makes tracking bills painless, and keeps the wolves at bay! And best of all, YOU feel like you are making some headway.

Although you may want to seek out credit counselors you may not need to and if you do need it you MUST take on the responsibility of finding a legitimate one!

Consolidated Credit Counseling organizations (CCC) will help you with all of your financial woes, get you on the right track for saving money and budget you for the length of your payments. They will talk with your creditors, usually only credit cards, medical bills, and student loans and have the interest rates lowered, stop late fees, or over credit limit fees. However the CCC’s AND the creditors will have some restrictions. It is likely your creditors will demand that you close the account you have with them and will not allow you to reopen the same account once it is paid off. Also as I mentioned above, you will not be able to apply for any new credit while you are on the plan.

CCC’s will also charge a set up fee and monthly account fee, so be sure to ask about those amounts and figure them into the new monthly payment.

1. What kind of debt will fall under the Consolidated Credit Counseling?

Only unsecured debts, which are debts that won’t take something away from you if you can’t pay them off, usually credit cards, student loans, and doctor’s bills fall under the unsecured debt category.

2. Find a reputable CCC with these guidelines.

• Counselors need to be trained or certified from an outside agency not affiliated with the counseling organization.

• Check out CCC’s with the state attorney General’s Office

• Better Business Bureau

• Local Consumer Protection agency,

Sometimes I have been known to find a wealth of information just by Googling It! Using the company name in the search box, you never know what others may say about the company on blogs, in newspapers, or other consumer sites.

3. Generally a reputable CCC will offer Free information to you regarding their company, have a meeting with you regarding your entire financial situation and let you know ON THE FIRST MEETING, BEFORE you sign anything, what fees will be required. If you are unable to pay set up fees, you may ask for a fee waiver, no guarantee you will get it, but it doesn’t hurt to ask.

There services should include, budget guidance, financial savings and debt education. Be leery of a company that pushes a “Debt Management Plan” (DMP) as your only option.

Special Note: Since the FTC is cracking down on fraudulent CCC’s it is possible that once you are signed up with a CCC and are in a contract for a DMP the company may go out of business, either by a crack down or simply from bad management.

Always be aware of the payments that are being made in your name to your creditors. You should get a monthly statement from the CCC. You may possible receive a letter from the CCC informing you that they are being bought out or transferred to another company. Check your research and make sure it is also a legitimate company. OR you may be able to negotiate with your creditors on your own now. Some may allow you to continue with the DMP without a CCC.

Always be sure your creditors have agreed to cooperate with a CCC, be sure your creditors give you confirmation either by mail or telephone..

Ask how employees of the CCC are paid. Do they receive compensation for getting you to agree to different types of plans? Are they commissioned just for signing you up? If so, you may want to look elsewhere!

Be aware of Debt Negotiation Programs. They are not the same as CCC.

A Debt Negotiation company may say they are not-for-profit, but may charge a lot of money for there services. They may say they can arrange a deal with your creditors, typically credit cards, to only pay a portion of the money you own them. They will state that it will not look bad on your credit and the credit card companies are happy to get anything from you. They may also tell you to stop making payments to the credit card companies and make the full agreed upon amount to the Debt Negotiation Company. Do Not Get Involved with these companies!!! And do not attempt to make these deals on your own! It will show up as a huge negative mark on your credit score, it will damage your credit, and the IRS will show the money that was not paid as income for you! Example:

You owe $10,000 on ABC Credit Card. You or the Debt Negotiator talks with ABC and they agree to allow you to pay only $5,000 of the debt in one lump sum. The other $5,000 you did not pay, not only shows up as default on your credit but ABC Company will show the amount as income to you and to the IRS.

By and large the best thing to do is trying and talk to your creditors yourself first. In this day and age, with all the foreclosures, some credit card companies have some compassion and may allow interest rates to be lowered or late fees to be canceled if you just ask! I said SOME, not ALL.

Contact my office and let’s talk. You may have options you haven't thought of!

Note: The Bankruptcy Abuse and Prevention and Consumer Protection act of 2005 states that before you file for bankruptcy you must have a plan of action with a government approved credit counseling agency within 180 days before you file. And attend debtor education courses.

Some helpful Websites for Oklahoma Consumers

Association of Independent Consumer Credit Counseling Agencies - AICCCA

United State Department of Justice debtor education providers:

United States Department of Justice approved Credit Counseling Agencies

For the Western District of Oklahoma (OKW)

Oklahoma Department of Consumer Credit