If there's a bright side to the current credit crunch with all its bankruptcies, home foreclosures and credit card defaults, it's this: Asking for help has never been so respectable.
"People are getting help now, and that's good," says Jeannine Moore, vice president of marketing and business development at Consumer Credit Counseling Service of San Francisco. "It's a shame they need it but good it's available. And people don't feel so alone now. They can admit to their friends or neighbors that they're going through a difficult time. Some of the stigma is gone."
Once you're ready to take that plunge, start by asking these questions to find the best help:
1. What services do you provide?The general headings "credit counseling" and "debt counseling" encompass a variety of possibilities, but the two major categories are: those that just do counseling and education (often called "credit counselors") and those that help negotiate reduction of your debts and/or actually take over making the payments for you (often called "debt counselors" or "debt management plans").
While the second may sound like a good idea when you're in trouble, that aspect of the business attracts the most negative press and requires the most vigilance on your part to make sure you're getting value for your money. Our focus here is on actual counseling services.
2. Can this organization meet the requirements of the law?Since 2005, the law requires that anyone filing for bankruptcy must attend an "individual or group briefing" from a nonprofit budget and credit counseling agency and that someone filing under Chapter 7 or Chapter 13 must complete an "instructional course in personal financial management" before his or her debts are discharged.
If you're seeking counseling specifically for those reasons, make sure the agency you select can give you the sign-off you need. The Executive Office for United States Trustees provides a list of agencies approved to offer these services.
Similarly, if you're trying to qualify for a loan modification or refinancing under the federal government's Making Home Affordable program, you should find an approved housing counseling agency.
3. Is this a bona fide not-for-profit organization?
Some places throw around the term "nonprofit" carelessly. What you want to look for is that they have official status under Section 501(c)(3) of the Internal Revenue Service Code. To do this, visit www.irs.gov/charities and choose "Search for Charities" on the left-hand side.
In many cases, you can also find the complete financial statements (Form 990) of a charitable organization at Guidestar.com. If you don't see what you're looking for there, ask someone at the organization for their Form 990. This is public information and they are required to make it available to you upon request.
An additional word of caution: A few years ago, the IRS realized it had granted nonprofit status to more credit and debt counseling organizations than it should have and began a process of scrutinizing these and, in some cases, revoking their status. So beware, make sure you're reviewing recent data, and don't stop with this step. Continue with the rest of the questions.
4. By whom are you accredited?Make sure the accreditation comes from a legitimate, independent third party. A few good ones to look for are the Better Business Bureau and the National Foundation for Credit Counseling.
5. Are all your counselors trained and certified?Again, look for a legitimate, independent certification from an outside organization. If the counseling company itself certifies their own workers, that's not good enough. Also look for relevant education and professional credentials. Are the firm's counselors Certified Financial Planners, lawyers, certified public accountants or other experts who inspire confidence?