Consumer Debt Counseling Options,
Information on Fair Debt Collecting
In April of 2005, Congress passed the Bankruptcy Abuse Prevention and Consumer Protection Act. This law tightens restrictions on the declaration of bankruptcy. To further aid in these matters, this law also states that any persons looking to file for bankruptcy must first go through consumer debt counseling or another form of credit counseling.
Many Americans actually turn to consumer debt counseling long before they even consider filing for bankruptcy. This is due to consumer debts mounting up and Americans wanting to go over their financial situations with a counselor to learn what their options are. In some cases, bankruptcy might not even be feasible.
In consumer debt counseling, people discuss with counselors what type of debt repayment or debt management plan would work for them to eventually clear their debts. If bankruptcy is the best option, then consumer debt counseling determines whether Chapter 7 bankruptcy or Chapter 13 bankruptcy is more viable.
People receiving consumer debt counseling also learn what the Fair Debt Collection Practices Act (FDCPA) is. This federal law regulates the work behavior of debt collectors. If a debt collector's behavior borders on harassment or abuse in any way, it is illegal. Thus, the debtor can ask to cease communication with this debt collector via a Dispute Letter. However, this does not clear the debt. The consumer still has to pay and may eventually be contacted by another collection agency.
Many debt collectors follow the guidelines set down by the FDCPA and go about their work honestly and scrupulously. The FDCPA only exists to protect debtors' rights and privacy in the event that a debt collector crosses the line. While most debt collectors will not act illegally, debtors should still be aware of their rights under the FDCPA. Going through consumer debt counseling is one way of learning about them and understanding them.
With more Americans finding themselves going into debt every year and needing the type of aid consumer debt counseling can provide, consumer debt counseling services have quickly developed into a growing and thriving business. However, consumer debt counseling services have also become susceptible to growth industry abuses.
Most consumer debt counseling services want to offer crucial financial advice to debtors in order to create a viable debt management or repayment plan to help them get out of debt. However, there are some who violate federal statutes.
While consumer debt counseling organizations are supposed to be nonprofit, certain consumer debt counseling centers essentially operate as call centers. Instead of educating debtors on their financial options, a sales staff pushes debt management plans onto them with hidden fees that drive them even further into debt. These debtors unfortunately do not receive the counseling they need and their debts continue to pile up. The money they put in is mostly funneled and processed via for-profit affiliates.
Debtors should research any debt counseling organization they are interested in to avoid being taken advantage of by unscrupulous ones. If possible, they should look for an accredited consumer debt counseling organization like the National Foundation for Credit Counseling, a 50-year old organization with strict member guidelines. They should also beware giving out credit card or bank account numbers as well as any fee over twenty dollars. Any reputable consumer debt counseling service will not demand a high fee or contribution nor keep the first month's payment.