How to find a legitimate nonprofit credit counselor
NEW YORK — When you’re in debt and need help negotiating your way out — and staying out in the future — consumer credit counseling sounds like a godsend. But it can also be a nightmare.
It turns out plenty of organizations calling themselves nonprofit counseling agencies have been selling debt-consolidation plans to folks who couldn’t really afford them. Earlier this month the IRS, after a lengthy investigation, revoked the tax-free status of 41 agencies and is eyeing plenty more for enforcement.
Counseling can provide many benefits for debtors: a rundown of debts and assets, education on using credit wisely and, if it is needed, a debt-management program. Under last year’s bankruptcy law, anyone filing for bankruptcy protection must undergo counseling with a government-approved agency.
The government’s list might be a good place to start, says John Ventura, director of the Texas Consumer Complaints Center at the University of Houston Law School. Check with the U.S. Trustee Program at www.usdoj.gov/ust to find out which agencies are approved to fulfill the bankruptcy requirement, even if you don’t plan on filing for bankruptcy.
A reliable agency should focus on providing you with classes, workshops and information, not just on collecting information about your debts and telling you how much to repay every month, says the IRS.
Debt-management programs, in which the counseling agency negotiates reduced rates with your creditors and then distributes monthly payments you make, may or may not be right for you depending on your specific situation. Be careful: Those programs can come with extra fees and hurt your credit score in the long run.
- Source: Marketwatch, via the Detroit Free Press, May 28, 2006
