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Would a credit counseling plan work for you?

Sometimes it happens all at once. Some event occurs and you have to take on additional debt, often via credit card. At the time, either you don't have time to debate the merits of the alternatives or it seems like something you can handle. But then, something else goes awry and you ability to pay that debt is compromised.

You cut back on your spending, borrow from friends or drain your savings. Your situation does not improve and become more desperate. You have seen the ads for "credit counseling" and think that maybe they can help. 

Maybe they can, but you have to understand what they can do. They may be able to lower some of your interest rates and remove some of the outrageous late fees that can accrue when you miss payments on a credit card bill.

But that's about it. Your principle debt will remain. They may allow you more time to pay, but you may be facing years of repayment to eliminate that debt. With a longer term, you should determine how much that added time cost in interest charges.

Before you sign up for anything, you should receive an estimate of what your total settlement will cost, in addition to the fees the agency will charge. You should calculate what the tax consequences could be for the settled debt.

With these services, you need to be cautious, as unscrupulous debt relief agencies have charged fees and in return provided little or nothing to the consumer.

At this point, you should also discuss your debt matters with a bankruptcy attorney. If you have not filed a bankruptcy recently, it may be a viable option. And it may do a better job at truly eliminating your credit card debt and allowing you to obtain a genuine start fresh, with improved financial health for the future.

Source:, "Can Someone Else Negotiate With Debt Collectors for Me?" Karin Price Mueller, October 5, 2015

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