October 23, 2017

CFPB: How to Get a Handle on Debt

By Courtney-Rose Dantus

There are many steps both big and small to getting a handle on your debt. If you’re unsure where to turn for help or who to trust, you’re not alone. We estimate that about one in three people have been contacted by a creditor or collector seeking to collect a debt within the past year.

No matter your reasons for changing your financial situation, there are resources available to help you pay off what you owe. If you want to take steps toward any of your financial goals, we’re here to help.

Consider working with a credit counselor

Credit counselors can advise you on ways to manage your money and debt and help you create and follow a budget, which can help lead to things like saving or paying off a debt. Credit counselors are usually nonprofit organizations, and you can find them through an internet search. One place to start is with the National Foundation for Credit Counseling, through their website or by phone at (800) 388-2227. Then, check on the organization with your state’s attorney general  or your local consumer protection agency .

A counselor may:

Develop a debt management plan

A credit counselor can help you develop a debt management plan for some or all of your debts. You may make one payment to the credit counseling organization each month or pay period to use toward payments to your creditors, which may help you focus on your other financial goals.

Credit counselors usually don’t try to reduce the amount of debt you owe. But they may be able to help lower your payments by having you make payments over a longer period, or they may get your creditors to lower your interest rate.

Beware of debt settlement companies that charge up-front fees in return for promising to settle your debts

Debt settlement companies are different from nonprofit credit counseling organizations. These companies often claim they can make a deal with your creditors to reduce the amount of debt you owe. Beware of companies that charge up-front fees. Charging a fee before settling at least one of your debts is illegal for most debt settlement companies. Dealing with debt settlement companies can be risky; you may end up in more debt than when you started. That’s because many debt settlement companies:

What they may not tell you is that not paying your debts while trying to settle them can lower your credit scores, add late fees and interest to your account, or cause creditors or debt collectors to file lawsuits against you. These can all slow your momentum toward financial growth.

You should avoid doing business with any debt settlement company that:

You can check on the debt settlement company with your state’s attorney general or your local consumer protection agency .

Paying off debt can be a long journey. But using this information can get you on track to achieve your financial goals.

We have additional information about working with debt collectors, including sample letters you can use for your own situation. You can also submit a complaint about a debt collection issue or call us toll-free at (855) 411-CFPB (2372), Monday through Friday, 8 a.m. to 8 p.m. ET.

Pass it on! You can download this information in English or Spanish .

This post was originally published here.