When the US Congress made sweeping changes to the US Bankruptcy Code in 2005, one of the new requirements was mandatory credit counseling for potential filers. With personal debt whirling out of control and bankruptcy rates closely following, Congress hoped that counseling may avert some bankruptcies but, at the least, it would educate those who actually file bankruptcy and perhaps prevent another filing in years to come. Unfortunately, with the creation of the need for credit counselors, many unscrupulous agencies emerged. Legitimate agencies function as a go-between between you and your creditors, offer advice on credit management and guidance on budgeting. Others, not so legitimate, are usually interested only in your money. A Denver bankruptcy lawyer can help you find a legitimate credit counseling agency to fulfil the counseling requirement.
Many of these “less than legitimate” agencies actually produce very few results. And not inexpensively. Up front money is one of their standard operating modes and can be more than $1500 in some cases. Then, once they have your money in their paws, they vanish, leaving behind only an empty store front or unanswered calls.
So, what are some of the warning signs that that advertisement you’re holding for a credit counseling company is probably not in your best interest?
1. If it sounds too good to be true, it probably is. An old adage, but very true here. Beware of miraculous cures and unreasonable sounding promises.
2. No up front fees. No respectable company will ask for fees up front. The first consultation should always be free and other visits a small, monthly fee.
3. Do your homework. Before hiring an agency on your behalf, check with the Better Business Bureau or your state’s consumer advocate office. Any reported conflicts should have been resolved satisfactorily and in a reasonable amount of time.
4. Beware of high fees. Any high fee or other requested payment that seems unreasonable probably is. No reputable agency should ask for any payment other than the agreed upon monthly fee.
5. Confirm payments with creditors. Some counseling agencies require customers to send in a lump sum monthly that will be divided among creditors. Give those creditors a call on your own to verify that they did indeed receive payments.
What is the best way to find a legitimate agency?
The National Foundation for Credit Counseling’s website offers many sources of advice and articles on credit counseling and how to choose an agency. A bankruptcy lawyer in Denver can also supply you with a list.
Non-profit agencies are always the best choices. There are reputable for-profit organizations as well, but weeding out the bad from the good may be more difficult. A really good agency will offer education as well as counseling, debt consolidation and mediation. After all, once the debts are satisfied, you will want to know you have the knowledge and tools to move on successfully.
Carefully read any agreement from your chosen company. All terms of the agreement should be plainly set forth including any fees, services to be rendered, payment terms, total cost, the length of time required for results, any guarantees offered and the business’s name and address.
And don’t forget, if it sounds too good to be true, it probably is. A Denver bankruptcy attorney can answer any further questions for you.
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