With consumer debt at an all-time high, many organizations are marketing solutions such as credit counseling and debt negotiation programs as alternatives to Bankruptcy. The challenge for the consumer is to determine which of these organizations are reputable and can deliver the benefits they promise. The amount of debt you have may be manageable with some guidance from a professional such as a credit counselor. A reputable credit counseling agency wants to help you take charge of your debts just as a reputable bankruptcy lawyer does. If the credit counselor feels that your debt load is unmanageable for you and cannot formulate a successful debt management plan (DMP), they will refer you to a reputable bankruptcy law firm and a visa versa. If you feel that your debts are simply unmanageable given your present income, feel free to call my office www.michiganbankruptcylawyer.com Attorney Walter Metzen at 313-962-4656 or 888-4Walter. If you feel you can afford to pay your creditors in full and just need a payment plan you can afford and wish to avoid bankruptcy, give credit counseling a try.
A reputable credit counseling agency can advise you on managing credit and help you develop a budget and plan to solve your money problems. These agencies typically provide free information and educational materials. Under a DMP you deposit money with the agency every month to pay your bills. You will pay a fee for this service, but the agency may be able to negotiate lower interest rates and fees with your creditors. If you use a DMP, the words “managed by a credit counseling company” will appear on your credit report, and may be viewed negatively by creditors. If you want to learn more about these services, I recommend that you contact Greenpath Debt Solutions. Greenpath has helped thousands of people manage their debt and avoid bankruptcy. I frequently advise potential clients who come into my office for a consultation to give Greenpath a try because they really don't have enough debt to file a bankruptcy. GreenPath is also known as Consumer Credit Counseling Service of Michigan. Click the image below for a link to their website.
Choosing a Credit Counselor
Living paycheck to paycheck? Worried about debt collectors? Can't seem to develop a workable budget, let alone save money for retirement? If this sounds familiar, you may want to consider the services of a credit counselor. Many credit counseling organizations are nonprofit and work with you to solve your financial problems. But beware--just because an organization says it is "nonprofit" doesn't guarantee that its services are free or affordable, or that its services are legitimate. In fact, some credit counseling organizations charge high fees, some of which may be hidden, or urge consumers to make "voluntary" contributions that cause them to fall deeper into debt.
Most credit counselors offer services through local offices, the Internet, or on the telephone. If possible, find an organization that offers in-person counseling. Many universities, military bases, credit unions, housing authorities, and branches of the U.S. Cooperative Extension Service operate nonprofit credit counseling programs. Your financial institution, local consumer protection agency, and friends and family also may be good sources of information and referrals.
Reputable credit counseling organizations advise you on managing your money and debts, help you develop a budget, and usually offer free educational materials and workshops. Their counselors are certified and trained in the areas of consumer credit, money and debt management, and budgeting. Counselors discuss your entire financial situation with you, and help you develop a personalized plan to solve your money problems. An initial counseling session typically lasts an hour, with an offer of follow-up sessions.
A reputable credit counseling agency should send you free information about itself and the services it provides without requiring you to provide any details about your situation. If a firm doesn't do that, consider it a red flag and go elsewhere for help.
GreenPath is a non-profit company that has helped offer consumers debt help since 1961. Their certified, consumer credit counselors will help you with all your debt reduction: car loans, mortgages, credit cards, medical bills, and all consumer debt. Most of our competitors work only with credit cards. We will help you learn to better manage money on your own. And we will always be available if you have questions.
Questions to Ask
Here are some questions to ask to help you find the best counselor for you.
What services do you offer? Look for an organization that offers a range of services, including budget counseling, and savings and debt management classes. Avoid organizations that push a debt management plan (DMP) as your only option before they spend a significant amount of time analyzing your financial situation.
Do you offer information? Are educational materials available for free? Avoid organizations that charge for information.
In addition to helping me solve my immediate problem, will you help me develop a plan for avoiding problems in the future?
What are your fees? Are there set-up and/or monthly fees? Get a specific price quote in writing.
What if I can't afford to pay your fees or make contributions? If an organization won't help you because you can't afford to pay, look elsewhere for help.
Will I have a formal written agreement or contract with you? Don't sign anything without reading it first. Make sure all verbal promises are in writing.
Are you licensed to offer your services in my state?
What are the qualifications of your counselors? Are they accredited or certified by an outside organization? If so, by whom? If not, how are they trained? Try to use an organization whose counselors are trained by a non-affiliated party.
What assurance do I have that information about me (including my address, phone number, and financial information) will be kept confidential and secure?
How are your employees compensated? Are they paid more if I sign up for certain services, if I pay a fee, or if I make a contribution to your organization? If the answer is yes, consider it a red flag and go elsewhere for help.
Debt Management Plans
If your financial problems stem from too much debt or your inability to repay your debts, a credit counseling agency may recommend that you enroll in a debt management plan. A DMP alone is not credit counseling, and DMPs are not for everyone. Consider signing on for one of these plans only after a certified credit counselor has spent time thoroughly reviewing your financial situation, and has offered you customized advice on managing your money. Even if a DMP is appropriate for you, a reputable credit counseling organization still will help you create a budget and teach you money management skills.
How a DMP Works
You deposit money each month with the credit counseling organization. The organization uses your deposits to pay your unsecured debts, like credit card bills, student loans, and medical bills, according to a payment schedule the counselor develops with you and your creditors. Your creditors may agree to lower your interest rates and waive certain fees, but check with all your creditors to be sure that they offer the concessions that a credit counseling organization describes to you. A successful DMP requires you to make regular, timely payments, and could take 48 months or longer to complete. Ask the credit counselor to estimate how long it will take for you to complete the plan. You also may have to agree not to apply for--or use--any additional credit while you're participating in the plan.
Is a DMP Right For You?
In addition to the questions already listed, here are some other important ones to ask if you're considering enrolling in a DMP.
Is a DMP the only option you can give me? Will you provide me with on-going budgeting advice, regardless of whether I enroll in a DMP? If an organization offers only DMPs, find another credit counseling organization that also will help you create a budget and teach you money management skills.
How does your DMP work? How will you make sure that all my creditors will be paid by the applicable due dates and in the correct billing cycle? If a DMP is appropriate, sign up for one that allows all your creditors to be paid before your payment due dates and within the correct billing cycle.
How is the amount of my payment determined? What if the amount is more than I can afford? Don't sign up for a DMP if you can't afford the monthly payment.
How often can I get status reports on my accounts? Can I get access to my accounts online or by phone? Make sure that the organization you sign up with is willing to provide regular, detailed statements about your account.
Can you get my creditors to lower or eliminate interest and finance charges, or waive late fees? If yes, contact your creditors to verify this, and ask them how long you have to be on the plan before the benefits kick in.
What debts aren't ncluded in the DMP? This is important because you'll have to pay those bills on your own.
Do I have to make any payments to my creditors before they will accept the proposed payment plan? Some creditors require a payment to the credit counselor before accepting you into a DMP. If a credit counselor tells you this is so, call your creditors to verify this information before you send money to the credit counseling agency.
How will enrolling in a DMP affect my credit? Beware of any organization that tells you it can remove accurate negative information from your credit report. Legally, it can't be done. Accurate negative information may stay on your credit report for up to seven years.
Can you get my creditors to "re-age" my accounts--that is, to make my accounts current? If so, how many payments will I have to make before my creditors will do so? Even if your accounts are "re-aged," negative information from past delinquencies or late payments will remain on your credit report.
How to Make a DMP Work for You
The following steps will help you benefit from a DMP, and avoid falling further into debt.
Continue to pay your bills until the plan has been approved by your creditors. If you stop making payments before your creditors have accepted you into a plan, you'll face late fees, penalties, and negative entries on your credit report.
Contact your creditors and confirm that they have accepted the proposed plan before you send any payments to the credit counseling organization for your DMP.
Make sure the organization's payment schedule allows your debts to be paid before they are due each month. Paying on time will help you avoid late fees and penalties. Call each of your creditors on the first of every month to make sure the agency has paid them on time.
Review monthly statements from your creditors to make sure they have received your payments.
If your debt management plan depends on your creditors agreeing to lower or eliminate interest and finance charges, or waive late fees, make sure these concessions are reflected on your statements.
A word of warning: The Federal Trade Commission has issued consumer warnings about credit counseling and debt consolidation services that promise to reduce your debts dramatically or to “repair bad credit”. Some of these organizations, many of them non-profits, make exaggerated claims and charge high fees for their services. For example, the FTC has filed charges against AmeriDebt for defrauding consumers of millions of dollars through excessive, hidden fees while falsely pitching itself as nonprofit. A reputable credit counseling organization such as Greenpath Debt Solutions will give you free information about itself, the services it provides, and the fees it charges without requiring you to provide details about your situation. You shouldn’t deal with any organization that won’t provide this information. For more advice on choosing a credit counselor, go to www.ftc.gov/bcp/conline/pubs/credit/fiscal.htm.
Another word of warning: If you are a homeowner, creditors may try to pressure you into borrowing against the equity in your home to pay off unsecured debts like credit cards or medical bills. Putting your home at risk to pay these creditors is rarely a good idea. Before you consider a home equity loan you should consult with a housing counseling agency by calling HUD at 1-800-569-4287. Negotiating lower interest rates on credit card debt
If you’re paying high interest rates on credit card debt, you may be able to negotiate better terms. Many people have used this approach successfully and you have absolutely nothing to lose by trying. Bear in mind that credit card companies compete for your business and might lower your rate if necessary to keep you as a customer. Get on the phone with your credit card company and say something like this: “Hello, this is_________. I am using your company’s credit card, but I have received offers to transfer to another company at a lower rate. If you can’t give me a lower rate, I’m going to transfer the balance and cancel my account.” Negotiating a workout for a mortgage default
If you fall behind in mortgage payments, you may be able to get the lender to agree to a workout, which is a temporary or permanent change to your mortgage terms. Because workouts are complex, you should try to get help from a non-profit housing counselor or lawyer with experience in mortgage workouts. To find a HUD-approved housing counselor to advise you, call 1-800-569-4287.
If your problem is not just debt, but chronic debt, you may benefit from a program that can help you learn to make conscious decisions about how you spend money. While this is not necessarily an alternative to bankruptcy, it may be a step you need to take to keep from getting back into financial trouble after bankruptcy. Many people are trapped in a pattern of impulse buying or emotional spending and seem to lack the ability to live within their means. Debtor’s Anonymous is a free, self-help program that provides educational materials and a support system for people who want to regain control over their finances. If you feel embarrassed about your financial situation, you may be relieved to learn that many prominent, successful people have struggled with compulsive spending problems and have found help through Debtor’s Anonymous. To find a Debtor's Anonymous meeting in the Detroit Area call 734-489-0252 or visit www.debtorsanonymous.org for more information.
If there's anything worse than filing for bankruptcy, it's having to do so and then hiring the wrong attorney for the job. For many lawyers, bankruptcy filings have become a volume business, and debtors facing bankruptcy sometimes unfortunately obtain inferior legal services. For this reason, you'll need to do some research before hiring a bankruptcy lawyer.
Here are 10 tips to help you find the best attorney to handle your bankruptcy filing:
1.Ask lots of questions. Once you have some candidates in mind, ask them the following questions (The answers to each of these questions are critical, so if you get evasive answers, it's probably a red flag that this is not the firm for you):
§What certifications do you have?
§How many bankruptcies have you handled?
§How many do you handle in a month or year?
§Of those, how many are business filings?
§How much access will I have to you during my filing?
§If I'm not working directly with you, who will I be working with?
§Can I interview the person with whom I would be working?
§What time frame do you have for this bankruptcy?
§How will the procedure work?
2.Don't procrastinate. The idea of hiring a bankruptcy attorney has all the allure of having teeth pulled. But don't let this prevent you from beginning your investigation for a good lawyer as soon as you know you're going to need one. Waiting until the last moment won't give a good attorney enough time to adequately prepare your case.
3.Don't hire the cheapest lawyer. Obviously, in this circumstance you don't have a lot of cash to spare. But like most things in life, you get what you pay for. You want a lawyer who knows the system, and who will do the best job of representing you. That may end up costing a little more. Your local bar association can probably help you determine whether a proposed fee is fair and in line with local standards. Anybody who charges too much or too little probably shouldn't be your lawyer of choice.
4.Seek the advice of other legal professionals. Ask yourself which business acquaintances you know, who might in turn know a good bankruptcy lawyer. If you have a personal attorney, that's a good place to start. Understand, however, that bankruptcy law is a specialty. If your lawyer offers to handle the case as part of your usual retainer, be certain he knows his way around bankruptcy court.
5.Spend a day at bankruptcy court. Observing bankruptcy attorneys in action might give you an idea of the type of lawyer you want representing you. At the court you can also find out which local attorneys specialize in this form of law.
6.Find out who sits on your local bankruptcy court panels. The only lawyers you'll find on this panel will be well-respected attorneys who regularly appear in bankruptcy court. Also, get the names of lawyers on the local bankruptcy court's debtor or creditor committees. People on these committees do it to attract business, but they also take their work seriously.
7.Visit law offices. An office appraisal can give you vital clues as to how a lawyer would handle your case. Look around the office and see how well organized it is. Is it neat, or are there coffee-stained folders strewn about the floor? You wouldn't go to a doctor with a dirty examining room; don't hire a lawyer with a disorganized office.
8.Evaluate the responses thoroughly. As mentioned, bankruptcy law can be a volume business, which means the time you'll actually spend with a specific attorney might be minimal compared to what you spend with a clerk or a paralegal. This is yet another reason to conduct a thorough interview process, and to carefully evaluate the responses. Did each candidate answer you fairly and in sufficient detail? Do both the attorney and the firm have the expertise you need? Do they appear overworked already?
9.Get fee specifics. Find out exactly what's included in your lawyer's fees and what isn't. In some complicated proceedings, for example, a forensic accountant may be needed. If that's the case, is it included in your charges or is it an additional fee?
10.Stay involved. Once you hire a lawyer, don't be content to let him or her handle it alone. Double-check all filings. Did any of your creditors get dropped off the list? Staying on top of your bankruptcy filing will help ensure that the proceedings go smoothly and will keep your lawyer on his or her toes.
Contact me, bankruptcy attorney
Walter Metzen to learn more about how the new Chapter 7 bankruptcy law
may affect your case. I offer a free initial consultation so we can
discuss your case personally.
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Bankruptcy attorney Walter Metzen
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