Oftentimes, Salem residents may believe their debt problems to be so extreme that they have no choice but to file for bankruptcy. In some cases, that may indeed end up being their best option. However, there are other resources available to help deal with debt prior to making the decision to seek bankruptcy protection. The chief among these is credit counseling.

Rather than offering direct debt relief, credit counseling services instead help debtors to better handle the expenses that they already have. According to the Federal Reserve, Americans are currently carrying more than $940 billion in revolving debt, with a vast majority of that being linked to consumer credit cards. A credit counseling service may be able to help those struggling with such debts through a Debt Management Plan. Acting as an intermediary between a debtor and his or her creditors, the service will set up a monthly payment schedule where each creditor will receive some repayment (typically less than a standard minimum monthly payment). The debtor then makes deposits into an account set up with the credit counseling service from which it makes the payments.

To know if a DMP is truly one’s best option at handling his or her debts, the Federal Trade Commission recommends asking the following questions of a prospective credit counseling provider:

  •          What debts are not covered through a DMP?
  •          How does a DMP impact one’s credit rating?
  •          Will creditors continue to impose interests, finance charges, and late fees?
  •          How are the monthly payment amounts determined?
  •          What happens when accounts are brought current?

One should remember that while credit counseling is a requirement for those looking to file for bankruptcy, he or she is not obligated to actually enroll in the service. Once such advice has been sought, the credit counseling requirement is considered fulfilled.