In 2005, the Bankruptcy Abuse Prevention and Consumer Protection Act was passed and announced to the public. This act requires consumers first take credit counseling before filing for bankruptcy. A consumer credit counseling agency aims to help those people who have debt problems with their repayment obligations and teach them how to manage their finances more effectively. Many people have trouble with proper budgeting and usually their filing for bankruptcy is a result of uncontrolled spending. Although there are cases where uncontrolled events such as divorce, sickness, or loss of job is the main reason for bankruptcy, ineffective financial management cannot be denied as one reason that contributed to this sad situation.



Why Be Wise In Choosing

Credit counselors should primarily look after their client's financial improvement. However, the reality is not all credit counseling agencies live up to this obligation. With the emergence of thousands of different credit counseling companies, a huge portion of these are only after their own benefit. In fact, even so-called non-profit organizations may be after their profit after all. Thus, it is important to be wise in choosing your credit counselor.

How to Choose the Right Counselor

How will you be able to tell genuine credit counselors from fake ones? It is crucial that you do your own research with regards to the agency's background and reputation. Don't accept a credit counseling agency's offer once without comparing it to other agencies. One way to do this is to check from the Better Business Bureau if there are any complaints against the company. If you see unresolved cases filed against the agency you're considering, better back off right away. Take your business somewhere else.

Be especially careful with credit counselors who only advise you or even oblige you to enroll to debt consolidation program right away without even studying your situation. A real credit counselor would take the time to look at your current financial state, and try to provide possible solutions outside debt consolidation. For instance, he may work with you with a budget plan on your monthly expenses or guide you through some steps on saving your money.

In most cases, those who force a client to consolidate their debts get a commission from each person they successfully enroll in the program. Although debt consolidation can help, it should be done only if other steps have already been taken. Some agencies would try to profit from their debt consolidation programs.

Watch out for credit counseling agencies that ask for an upfront fee. A credit counseling agency should not be asking for any advance payment, especially non-profit counseling agencies. If there is a payment, this should be after the service has been rendered and after the individual has gained stability on his finances. Furthermore, the service fee should not be unreasonably expensive.

To be sure, choose a credit counseling agency that is a member of the National Foundation for Credit Counseling or Association of Independent Consumer Credit Counseling Agencies.