It's always best to talk to your lender if you're having trouble meeting the minimum payments. But if you're having problems meeting payments with multiple lenders, it might be time toconsider a nonprofit credit-counseling firm. Credit-card companies are now required to print a toll-free number for nonprofit credit-counseling services on every bill.
The requirement, part of the Credit Card Act, is meant to prompt people to address their debt issues before they get completely out of hand. These nonprofits are in part funded by the credit-card companies.
Where to Start
Contact your creditors directly and try to work out a plan early, before multiple missed payments reduce your options. You should try to get interest rates cut, waive fees or even trim the amount owed. If you have multiple debts to resolve, you can enlist the help of one of the nonprofit credit-counseling firms that have been certified to do bankruptcy counseling. That means they have been vetted by the U.S. Trustee—as are the firms credit-card issuers will provide.
Here's how it works: typically the initial financial counseling session, including a thorough review of your budget and financial situation, is free. The nonprofit counselors can work with creditors to reduce interest rates and minimum payments and waive fees—but only for those who have the ability to repay all their current debts within five years.
For that, the consumer pays a monthly fee capped by each state, usually less than $50. The nonprofit counseling firms also receive payments from the credit-card issuers, either as annual grants or up to about 8% of the debts collected.
For Profit Debt Settlement Firms
Be wary of the many for-profit debt-settlement firms, which have come under fire in recent months. The Federal Trade Commission, the Government Accountability Office, several states and the Better Business Bureau have all singled out the industry for charging consumers large upfront fees, urging them to stop paying their creditors and then failing to resolve their debts.
These firms, unlike the nonprofits, say they will try to cut your debts owed. They generally encourage consumers to build up money in a bank account until enough has been saved to negotiate a settlement with creditors, a process that can take months or years.
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