What exactly do credit counseling agencies do? To put it simply, a credit counseling agency analyzes your sources of income and your expenses. The agency will:
A) Detail what you owe.
B) Give you an organized picture of your financial situation.
C) Provide options that match your resources, lifestyle, and goals.
D) Tell you the steps you need to take to reach those goals.
Whether you first contact a credit-counseling agency by phone, e-mail, or in person, the counselor will ask you why you're there, what you'd like to accomplish at the meeting, and what your short-term and long-term goals are.
Then some fairly detailed data-gathering will take place. You'll be asked about your income sources and tax deductions, as well as your monthly expenses. Having a good idea about what your monthly expenses are is very helpful, but it isn't a requirement - if you don't know, the credit counselor can help you estimate them. A quick subtraction of expenses from income will tell you how much you have available for monthly debt service, if any. The counselor will suggest ways to adjust your expenses or income, to get you to a positive cash-flow position (in which more money is coming into your household than is going out).
Next, you and the counselor will go over all the debts you have to pay. The positive cash flow from the earlier calculation will be applied to the amount you have to pay out. If anything is left over, you're basically done - you'll leave with an action plan and a budget you can follow to keep your expenses in line with your income. If the result is negative (if you have more expenses than you have income), you and your counselor will rework the expenses to free up cash flow and he'll tell you what your debt service would be under a debt-management plan.
This process of reducing your expenses and increasing your income will continue until you and the counselor get to a positive cash flow or it becomes apparent that, no matter what you do, the numbers just don't work in your favor. If you can't get to a positive cash flow, the counselor will refer you to an attorney or other community resources for additional help.
Everything described above can be done through the mail, over the phone, or via e mail. Often, the process involves more than one of these methods over a series of contacts and days. For example, you might start out on the Internet filling out a contact form and asking questions; then you might follow up with a phone call to clarify and discuss matters further; and you might go into an office or use the mail to finalize your solutions. The method of contact you use is just a matter of what you're most comfortable with - one method isn't better than another.
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