Red Zone Help
Consider Credit Counseling

Need help from the red zone?

Begin by looking into not-for-profit credit counseling.

If you fallen behind by more than 30 days or more on several credit cards and your accounts are not in collection, Take proactive action.  

These counseling firms will work with your credit card companies to negotiate lower interest rates, relief from over the limit charges and will try to re-age your account to stop ongoing late charges.

Your payments are made to the not-for-profit (NPF) company which then forwards your payments to the various creditors.

The goal of NPF is to get you out of credit card debt. To do so, your payments may not be as low as you expected when you factor in lower interest rates. The NPF will build in an amount over and above the minimum payment and then use the equivalent of a debt roll plan to pay off your debt.

Good not-for-profit companies programs target having you out of debt within three to five years. Statically, the chances of staying with the program longer than is low. Recently released statistics indicate that the only 26% of those who start a three to five year program stick successfully complete the plan. Paying off your debt takes time and perseverance.

There are many companies in this business throughout the US but not all are created equal. The term not-for-profit is a tax status under IRS regulations; it does not mean these companies can make money. Almost all of the companies charge fees both for start-up and monthly maintenance fees. These fees may vary broadly from compay to company.

A fee should only be charged if you sign up for a payment assistance program with it.

Your choice of a firm should provide a free initial consulting (it may ask for a voluntary donation) face to face or over telephone and provide free educational information on home budgeting, managing debt and financial literacy.  

A trusted source for finding a not-for-profit counseling firm near you is the National Foundation for Credit Counseling. This organization certifies organizations that provide credit these services.

Do not be concerned to find out that the company receives payments from the credit card companies. Most do. It is called a "fair share" payment. 

Credit card companies recognized that using outside debt counselor to assist in collections is a less expensive to receive some or all of their accounts. Since a fair share is based upon the performance of the credit counseling firm, meaning the more successful, they are helping people the more their fair share percentage. It seems that firms that receive higher fair share receipts may be better to help you in managing.

Being told by a not-for-profit credit counseling firm they are not able to assist you with a debt repayment program is disheartening.  Before you contact an attorney to discuss whether or not you qualify for bankruptcy, you may want to give negotiation a try. 

Go from credit counseling back to managing debt

Go back to Budgeting