Consumer credit counseling: An overview

Consumer credit counseling is a way to avoid bankruptcy. It is always advisable to go though credit counseling for a debtor, at least six months before filling a bankruptcy. Credit counseling is a professional service in which credits counseling agencies or a body provides education about the financial problems and finds a solution to get a way out from debt burden, depending on the financial condition. A credit counselor will go through your financial profile and access your debt level in order to make an arrangement for making a payment plan to overcome the debt. Counselor can access the financial condition of the individual and the prevailing market condition to bargain for lower interest rates for the debtor with the creditor. The counselor access the financial condition of the individual through various means, it can be number of accounts, balance, minimum payment, balance due, and any past due account. The counselor after this will also considers your monthly income and bills. The counselor uses this summarized information to maker out a reasonable debt management plan (DMP) to pay off the debts. The proposed plan is then sent to the creditor for their approval. The creditor once approves the DMP, sent by the counselor the debtor can start making the payment following the DMP. The payment will be made through the counseling agency. The credit counselor once receives the payment will disburse payment to the creditors in accordance with the DMP. The one way it affects is that the credit accounts are closed for a debtor as long as the DMP continues.