by Troy Tarro

Created on: January 21, 2009   Last Updated: September 15, 2010

Debt Help In a Struggling Economy

It should come as a surprise to no one that the struggling United States economy had negative impact on personal finances. With the ever increasing rate of foreclosures and upturn in job losses, many families are experiencing a level of personal debt that may be beyond the ability to manage.

When faced with burgeoning debt, individuals face only three real choices: do not pay the debts and be subject to constant collection phone calls, file for bankruptcy protection, or consult a professional credit counselor. Those choosing to honor the debts for the money they borrowed select the credit counseling option.

In short, a credit counseling service serves as a go between for debtors and creditors. They work on behalf of the debtor and contact creditors in an effort to work out a payment arrangement that will help the individual retire the debt. In doing this, the credit counselor may negotiate a lower payment structure or lower interest rate to help the borrower complete their debt repayment. The credit counselor will interview the borrower and work out a budget allowing them to keep a percentage of their income for living expenses, while also giving a portion of their income to the credit counselor who will in-turn send each creditor a predetermined amount. As debts are retired, more funds are directed to other creditors until all debts are retired, the program is completed, and the borrower returns to managing their own finances.

While various organizations may list the words "credit counseling" in their names, the level of service and costs are not always consistent. Credit counselors are private companies and, in most cases, formed the purpose of making a profit. In order to generate these profits, the already struggling customer becomes the revenue source.

With this in mind, the best credit counseling option for consumers is Consumer Credit Counseling Services (CCCS). CCCS is a not for profit organization that relies on contributions from lenders and the United Way for funding. By relying on the creditors, CCCS takes the burden off of the consumer and asks the creditors to help themselves by supporting an organization attempting to facilitate repayment. A phone call to the local United Way chapter can usually point a borrower in the right direction.

Aside from not having to be the revenue center for the credit counselor, the borrower benefits as CCCS has a long standing reputation built relationship with creditors that allow them to negotiate the most favorable terms with creditors. Based on this reputation, creditors give CCCS the benefit of the doubt as to the customer's financial condition.

By working together, creditors, debtors, the United Way, and CCCS can help already struggling families regain their financial footing. It all starts with admission of a cash flow problem and one phone call for help.

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