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If you think being broke is just a poor man’s problem, get this: More Americans in higher income brackets are asking for assistance with their debt and reaching out to credit counseling agencies. An August survey by Consumer Credit Counseling Service (CCCS) of Greater Atlanta says the average client’s income is now close to $50,000 a year in this country – a dramatic 18% higher than the year-ago period. Experts say it’s partly to do with rising living costs, fewer jobs and a weak housing market. Life – in general – has gotten very expensive, very quickly. “A more affluent person who maybe hasn’t had credit card issues in the past is now finding themselves backed into a corner,” says Gerri Detweiler, credit advisor for

Here are the ins and outs of credit counseling.

Fear Little. The biggest reason debt-ridden consumers don’t seek credit counseling is because they’re scared of damaging their credit, experts say. “They’re afraid of ruining their credit rating…but the good news is that FICO (the credit scoring agency) doesn’t count that in calculating your credit score,” says Detweiler.

That said, if you later go through a debt management program, which is sometimes the next level in a credit counseling scenario, the counselor may request that you freeze your credit card accounts – if your bank hasn’t already done so - to help in your pay-off strategy.

It’s true that the act of closing or freezing your accounts is a bit of a red flag to credit rating agencies, but let’s face it– you’re trying to get help, right? Freezing your accounts to become debt free will prove trivial in your overall credit history, especially if it’s done to help you achieve financial freedom. “If you’re drowning [in debt] right now, it’s not the most crucial factor,” says Gayle Cunningham, spokesperson for the National Foundation of Credit Counselors.

Self-Evaluate. Are you barely able to pay the minimum monthly payments on your credit cards? Are credit collection hounds after you? Do you fear you can’t pay all your bills on time or have already missed some payments? If you answered yes to at least one of these questions, you’re ready to speak with a credit counselor.

Seek Certified Counselors. The Justice Department’s web site ( has a list of approved credit counseling agencies, but don’t just for the first counseling agency that you come across online. Investigate the validity of each agency you’re considering by searching in chat rooms, blogs and on credit counseling advice sites like the National Foundation for Credit Counseling and the Consumer Credit Counseling Service. Additionally, check with your state attorney general’s office and local Better Business Bureau for complaints.

Finally, be instinctive. “Go with your gut feeling,” says Cunningham. “If the agent is pushing you and not listening to your situation you might want to try another agency…Remember, it doesn’t affect your credit score just talking to a counseling agency.”

Expect Honest Advice. The first thing you should anticipate from the free initial consultation is judgment-free advice. No one should be badgering you over your $3,500 Visa overdraft. You and your counselor should objectively review your income, expenses, various loans, credit card balances and the amount of interest you pay to understand your true debt obligations. Next, “[the counselor] will go over your budget and make suggestions for changing your spending habits,” says Detweiler. You may discover you have to take just a few steps to lower your debt load to a more manageable place. Or it may be decided that you need to take more aggressive action by either entering a debt-management program or even further – a Chapter 13 bankruptcy.

What’s a Debt Management Program? About one third of the NFCC’s clients get referred to a DMP after the initial credit counselor consultation. You’re here mainly because your monthly debt obligations exceed your monthly take-home pay, and because the counselor estimates it will take you longer than a year to repay your debt. Through the program you pay the credit counseling agency a fixed amount of money each month until you are debt-free. Your debt is repaid 100% and usually takes two to four years to complete, for $10 to $15 a month. Make sure to get the costs in writing. Sometimes fees will be waived for extreme hardship.

The first step in a DMP is kind of a repeat of the initial consultation: going over your income streams, your budget and then making suggestions. Then you prioritize your payments. The first priority is paying for all your living expenses. The second is anything with major collateral, like your car loan. The counselor then approaches your creditors to try to negotiate lower monthly payments, lower interest charges, no fees, etc.

Be Proactive. Contact all of your creditors, from your banks to your student loan collection agency to medical offices. Make sure that the credit counseling agency has, in fact, been in touch with them and that they are in agreement with the new terms negotiated by the credit counseling agency. Then, thoroughly check your monthly statements to verify your payments are going through.
Should I File Chapter 13 Bankruptcy? If a credit counseling agency believes you can’t pay off your debt yourself in the next five years, you may likely be advised to look closely at Ch. 13 bankruptcy. This site has all the ins and outs.

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