Debt Collection and Credit Counseling

Are you struggling to pay your bills and getting notices from debt collection agencies? Have some of those collection notices turned into intrusive and aggressive phone calls demanding payment?

If the answer is yes to any of those questions, you’re part of a growing segment of the population that has financial problems that at times seem overwhelming. Regardless of the core financial problems like losing a job, a divorce, exorbitant medical bills, tax problems, or other issues, please don’t lose heart. With proper planning and guidance, your financial situation can improve.

Debt Collection

If you have stopped payments on one or more of those bills, you might be getting phone calls from debt collection agencies. This is hardly surprising. According to the Collection Agency FAQ published by cardreport.com, employees of debt collection agencies are paid, usually on commission, to call debtors and demand payments from them. Debt collectors heckle debtors because if they are able to collect payments from them, they receive handsome bonuses.

A debt collection agency has one purpose: to collect a debt owed to their client by the debtor. They are not in the business to counsel you on how to manage your finances. How the agency goes about collecting that debt usually depends on the size of the debt, when the last payment was made, and how the debtor responds to the collection attempt.

The worst thing you can do is to avoid the collection attempts or outright refuse to pay. There are no debtor prisons in the United States anymore, but refusing to pay money that you legitimately owe can land you in a “financial prison.” Your credit rating can be ruined, your paycheck can be garnished, and you can even be forced into bankruptcy.

Even though the collector’s voice may be harsh and demanding and even threatening, there is some recourse for the debtor to pursue in order to resolve the issue amicably. We’ll talk about your rights when it comes to debt collectors and harassment further along in this article.

Credit Counseling

Certified credit counselors are trained experts who evaluate your total financial situation and then work with you to establish a plan to pay off your debt. They may recommend a Debt Management Program. Their purpose is usually two-fold. First, they will set up a budget for you and explain if you have a shortfall (a deficit) or if you have money left over each month. They will also help you find ways to make cutbacks and save more money each month. Then, they will discuss some debt relief options with you. They may talk about a Debt Management Program, Debt Consolidation, DIY options, Bankruptcy, etc.

Credit counseling can be a very positive experience, one that hopefully brings you peace of mind and a feeling of relief from all of your debt problems. But for the system to work, you have to be completely honest and forthcoming about the financial figures you bring to the “counseling table”. In essence, a credit counselor can only help if you are honest about your current financial situation and are willing to get help.

If you decide a Debt Management Program is right for you, your counselor will work out a debt pay-down schedule and amount. Then, the payment plan is submitted to all of the creditors, and this is called a proposal. In the event a creditor is unwilling to accept the pay-down terms, you can still enroll in the debt management program and just pay that creditor on your own each month. The other creditors who have accepted (most will) are paid every month by the credit counseling agency. You will send a payment or have an amount withdrawn from your bank account. That payment will be split up appropriately and then sent to each creditor every month. You continue this until all of your debts have been paid in full.

Handling debt payments through a plan like this often mutually beneficial to both the debtor and the creditors. Your counselor may be able to restructure the debt and talk with the creditors to have them lower the terms to your benefit.

One term that might be lowered to help you out is the interest rate. Many times you’ll receive concessions from the creditors such as a lower interest rate, waived or reduced fees/penalties, shorter payoff time, no more phone calls, etc.

If you’re on a very tight budget, it’s more likely than not that most or all of your paycheck is going to your regular monthly needs: rent, utility bills, food, telephone and Internet service. A debt management program can help you get out of debt while still being able to take care of these other important financial responsibilities.

Debt Management Program

If you are considering credit counseling services and a debt management program to deal with unmanageable debt, congratulations! Admitting that you need help is the first and most important step to take when trying to solve difficult financial problems. Call an Advantage CCS representative today and find out more about our in-house, over the phone, and online credit counseling services. Sign up for a free credit counseling session as soon as you can.

Know Your Rights

The United States Federal Trade Commission has published several sources that list debtors’ rights when it comes to debt collection and collections agencies. The FTC Web site advises that if you are having trouble meeting your bills, you should contact all companies or entities to which you owe debts immediately. This ensures that your creditors are aware of your status. Some companies – for example, utility bill companies or cellular phone service providers – will permit you to work out payment plans that take your low cash flow into account.

There is actually a federal law in place called the Fair Debt Collection Practices Act (FDCPA) that outlines what constitutes legal and illegal debt collection practices. You can review the act in its entirety at http://www.ftc.gov/bcp/edu/pubs/consumer/credit/cre27.pdf. Make sure you understand your rights as a consumer before you attempt to deal with debt collectors. You might want to review the Fair Debt Collection Practices Act with your Advantage CCS credit counselor, as well. He or she can help you identify the parts of the act that are most important for you to understand, or learn how the act pertains to your specific debt management situation.

If you owe debts on medical bills or student loans, discuss this with your counselor as well, and formulate a plan of action for these types of debt during your free credit counseling session. For student loans, you will likely be able to put your loans into deferment or forbearance if you are able to prove your inability to pay due to a hardship. According to American Education Services (AES), you should try to pursue deferment first. Though deferment and forbearance both suspend monthly loan payments during your period of financial difficulty, you are responsible for any interest accrued on loans placed into forbearance.

The Federal Trade Commission also advises that you ensure your credit report is accurate, especially if you have just been laid off and are having trouble meeting monthly bill payments. It’s true that the lower your credit score is, the harder it is for you to do many of the things in life that should be relatively painless, such as: applying for jobs might require credit checks; renting an apartment, buying a house or car, will also require credit checks. If your credit score is lower than it should be, or there are multiple errors in the report, you should have the report corrected immediately. You can discuss the best steps to take during your credit counseling session.


Not having enough money can be tough. Fortunately, being aware of your rights, signing up for a free credit counseling session, enrolling in a Debt Management Program, and taking steps to repair your credit can help you during a rough financial period. Let the credit counselors at Advantage CCS help you get your financial life back on the right track!

Author: Lauralynn Mangis
Lauralynn is the Online Marketing Specialist for Advantage CCS. She is married and has two young daughters. She enjoys writing, reading, hiking, cooking, video games, sewing, and gardening. Lauralynn has a degree in Multimedia Technologies from Pittsburgh Technical College.