It's Time to Get Out of Debt
and Move On With Your Life!

To Consumers with Debt: Watch Out for False Promises- Know the Difference

FRIDAY, MAR 6, 2009

As the economy crumbles around many of us and more people struggling financially, we are finding that people are panicking. This leads them to become paralyzed where no action is taken to improve their financial situation or poor choices are made do to hasting decision making further harm their financial situation or they are reacting too late, limiting options they may have to help stabilize their personal financial situation.

In concern for the people in our community we want to help educate people on personal financial choices that are available to pay down and eliminate debt and establish budgeting skills to help ensure success of a plan. With education and a plan fear and anxiety will be reduced and people/families can remain stable in their homes and communities.

We have all seen or heard commercials offering an easy way out of debt, quick relief and guarantees of happy endings. If it sounds too good to be trueЕЕ., you may find yourself worse off then when you began.

Know the Difference When Choosing Help with Personal Money Concerns!

Credit Counseling:
Х Look for a Licensed and Accredited agency that offers in-person appointments as well as phone and internet.
Х Make sure the agency has certified counselors trained in areas of consumer credit, money & debt management and budgeting.
Х Reputable credit counseling organizations can advise you on managing your money and debts, help you develop a budget, and offer free educational materials.
Х An initial counseling session typically lasts an hour, with an offer of follow-up sessions. Less time may not give time to fully assess your situation and develop action plan.
Х Look for low or no costs and ability to waive fees.

Debt Management Plans:
Х Only sign up for a plan after a certified counselor has reviewed your financial situation and offered customized advice on managing your money.
Х Look for an agency that will still offer financial education and budgeting help after signing up for a plan.
Х A successful plan will require regular monthly payments. Get an estimate of completion time (should be 60 months or less).
Х While on a Debt Management Plan credit usage is limited.
Х Be wary of: 1) High upfront or monthly fees
2) Not sending free information without giving your personal information.
3) Signing up for a Debt Management Plan without time spent reviewing your financial situation or teaching money management skills.

Debt Negotiation or Settlement Programs:
Х Differ greatly from credit counseling. Often not regulated. Check with the Better Business Bureau or NYS Attorney General's Office on company being considered
Х Watch for high fees and charges on money supposedly saved. Usually between 13% and 20%
Х Payments going to Debt Settlement Company and not to creditors as they try to get creditor to settle for less than owed them.
Х Since creditor is not receiving timely payments additional penalties are added to the account. Higher rates, late and over limit fees (if exceeding credit line) and collection procedures can be started (judgment, frozen bank accounts and lien on home)
Х IRS and tax liability. If successful in getting a creditor to accept less than amount owed, the forgiven amount can be considered taxable income raising the amount of taxes owed to the IRS and state.
If considering a debt settlement company look to:
Х Select a company that is affiliated with an industry trade association which holds members accountable through accreditation.
Х Confirm that the account holding your deposits is FDIC-insured.
Х Obtain all disclosures in writing, including a good faith estimate of costs associated with the settlement.
Х Inquire about refunds of any money on deposit should you wish to drop out of the program.
Х Be cautious about promises or guarantees that seem unrealistic.