Creative Consumer: In Debt? Consider Counseling

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Nobody wants to say the "R" word for recession, but my letters certainly suggest people are hurting out there. Here are a couple of samples. For folks like this I suggest credit counseling, but the key is to seek help from a reputable firm. Details below. --Elisabeth Leamy

I am self-employed. I find myself currently in a large amount of debt. My credit is good and I pay all my bills ON TIME. My credit scores went down in the past year due to buying too much with deals at 0 percent. I know I owe a lot of money and I can pay it back, but I am now finding credit card companies charging me up from 19 up to 27 percent.

I call and they tell me that they cannot do anything. What can I do? If this keeps up and other companies do the same to me -- I will be PUSHED into not paying my bills and then I have a bigger problem. It's like they are throwing me to the wolves. Is there a consumer company that I can contact locally or can you give me some advice? -- BL, Marana, Ariz.

I have two credit cards and owe a total of $2,217.21. One month I decided to sign up for online bill pay; it took longer than I thought, so I mailed in my monthly payments. It got there late so I was charged a late fee. The late fee caused me to be over the limit and was charged another fee totaling $78 plus my monthly amount.

I called the next month when I received my statement and asked them to look at my payment history and explained what happened. No luck. The APR went up to 39 percent, and my payment went up. I keep getting o.l. (over-limit) fees. I called again asked what can I do, was told what to do to get caught up, and paid it. And still every time I received a statement, it got higher and higher. They refuse to help. I've asked them to waive and lower the APR, which will help my monthly go down. They wouldn't do it. I can't afford the high APR. What do you suggest I do? Help please. -- MH, Pasadena, Calif.

If you're trying to lose weight, and dieting on your own hasn't done it, you may sign up with a diet counselor. That counselor will give you pep talks, help you develop a menu, even weigh you to measure your progress. If you're trying to shed debt, and doing it on your own hasn't worked, you can go to a credit counselor. That counselor will give you pep talks, help you develop a budget and crunch the numbers to measure your progress. Credit counseling is a lifesaver, as long as the counselor you choose is reputable.

Here's how it works. You meet with a credit counseling service, usually a nonprofit. You and a counselor develop a budget by looking at your income, your expenses and your debt. Once you know how much money you can afford to put toward your debts each month, the counselor calls your creditors and negotiates a workable payment plan. This is something you can certainly do yourself, but credit counseling services have ongoing relationships with various banks and may have better luck.

The counselor will try to get your creditors to waive late fees, lower interest rates or accept smaller monthly payments -- maybe all of the above. Once the payment plan is set, you send a single check to the counseling service, which then forwards the money to your various creditors. You may have to agree not to take on any more debt while you participate in the program. Most credit counseling services also want you to attend educational classes to help you stay out of money trouble in the future.

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