Do You Need a Credit Counselor?

New Statistics Show it Could Prevent You from Falling into Bankruptcy; Take Charge America Offers 7 Signs

PHOENIX, Ariz. (July 6, 2006)... The bills keep piling up, and the paychecks seem to disappear more quickly. You’re on the brink of bankruptcy, now what?

Mike Sullivan, director of education for Take Charge America, a non-profit credit counseling agency, says it’s time to stop making excuses and seek help.

“There’s a point many consumers will reach when they realize that the burden of their bills will just be too much to bear,” he said. “Their choice of actions at that moment may determine whether this turning point will result in something better or worse.”

New statistics show those who seek help may be better off than those who don’t. A recently released report from the Consumer Federation of America and American Express reveals the benefits of early debt management programs (DMPs).

The study, conducted at Georgetown University’s Credit Research Center, found consumers who were recommended for a DMP by a credit counseling agency and chose to start making payments had a significantly lower incidence of bankruptcy. Moreover, these consumers had improved bankruptcy and delinquency risk scores over the next two years, compared to those who did not start a DMP.

“If you can tell that your financial future is hazy, it’s best to take early action,” said Sullivan. “If you don’t see a credit counselor before entering bankruptcy, you’ll be forced to once you file.”

Last fall, new bankruptcy laws made it more difficult to erase credit card and other debts in a bankruptcy. They also made seeing a credit counselor a requirement for those who file for Chapter 7 or Chapter 13 bankruptcy.

So, how do you know if it’s time for you to visit a credit counselor? Sullivan sets forth seven signs that you should look for when deciding if credit counseling is right for you:

• You Can’t Meet the Minimums – High-interest credit card debt plagues millions. In fact, the credit card industry says the average American household owes more than $9,000 in credit card debt. If missing the minimum payments is the norm for you, rather than the exception, you may need to visit a credit counselor.
• You Spend More Than You Take Home in Your Paycheck – Take time to add up all of your expenses for one month. And yes, that means even your morning latte’, movie rentals and other seemingly “trivial” expenses. You may be surprised just how much money you are actually spending. If quick fixes in your daily routine won’t remedy the situation, get advice from a professional.
• Collection Agencies Have Your Home Phone Number on Speed Dial – This may seem like a no-brainer to some; for others, the sense of being overwhelmed may prevent them from seeking help. Just remember, the creditors won’t stop calling, so it is best to deal with the situation before it gets any worse.
• You Lose Your Job – Unpredictable situations often force people into more debt than they can handle. If a new job is not on the horizon and your credit card bills are piling up, you need to come up with a plan. Consider seeking professional assistance sooner, rather than later.
• You Regularly Pay Bills Late – Late bills can have a negative affect on your credit score, which can in turn prevent you from receiving loans for a home or car. Don’t make a habit of paying late. The late fees can be astronomical. Get help and do it fast.
• You Must Use a Credit Card Just to Pay for Daily Necessities Like Food and Gas – Credit cards should not be used as free-for-alls. A few bucks here and few bucks there can eventually land you in serious debt. Using the card as a choice when you have the cash available is OK.
• You Need to Use the Cash Advance from One Credit Card to Pay Another – This is a sure fire sign that you’re in over your head with high-interest debt. Making payments this way is not getting you out of debt; you’re likely sinking further into it and need help.

“Don’t wait to seek financial help until all of these signs apply to you,” said Sullivan. “If you find yourself in one or two of these scenarios, find help before matters turn worse. And trust me; they can turn worse very quickly.”

About Take Charge America
Founded in 1987, Take Charge America, Inc. is a non-profit organization headquartered in Phoenix, Arizona. TCA offers a variety of services including financial education, credit counseling, and debt management. To learn more about TCA or its programs please call 1-800-823-7396 or visit www.takechargeamerica.org.