The Going Broke Blog

Via my Credit Repair for Dummies book, I learned about the option of credit and debt counseling, a service which can play arbiter between you and your creditors to negotiate interest rates and payments.

The creditors – your credit card companies, loan providers, etc. – want to get money out of you. It’s certainly not in their best interest to force you into declaring bankruptcy, in which case, they may not get a dime out of you. When you take on the services of a debt counseling agency, your creditors will assume you are in pretty dire straits, and would rather throw you a bone and get as much money out of you as they can than be hard-nosed and end up with nothing.

When seeking out a debt counselor, your best bet is to find a non-profit organization with reasonable fees. Do a Google search for your nearest metro area and “debt counseling” to see who pops up. Usually you will find some lists for your city, and the direct sites of counseling services themselves.

For example, I live in a rural area outside of San Antonio, Texas, so I just Googled “San Antonio debt counseling” and was pointed to several web sites, ending up with the Consumer Credit Counseling Service of San Antonio. Their non-profit status, accreditation and professional memberships, and fee structure all fit the ideal description provided by my Dummies book. I’ll reiterate here how empowering that book is when you’re facing debt problems.

I called the service the next day, and was told no appointment was necessary. Their web site clearly outlined all of the paperwork they would need for my counseling session, and it took forever, but I gathered it all up; bank records, loan information, credit card statements, pay stubs, etc. My wife and I also took the time to jot down a list of questions we would want to ensure were answered before our session was through.

I took the day off of work the next Friday and my wife and I dropped off our kids with the grandparents so we could both be in on the session, and both focus on absorbing the information and advice provided.

Upon arrival, in a waiting room resembling a family doctor’s office more than anything, a nice receptionist had us fill out some forms and said she would get the next available counselor for us. This service provided debt counseling at no charge.

After a short wait, a kindly counselor greeted us and took us into his office, as normal as any other. Family photos on the wall, certifications framed, books abound, and a computer gave the counselor access to the web and programs he would need to plug in our information and provide us with a kind of financial status report. I am good with numbers, so this wasn’t anything I didn’t already have in hand, but it provides good perspective to those for whom numbers create confusion and blank stares.

Turns out there wasn’t much to soak up: the counselor agreed we had gone broke. Chapter 7 Bankruptcy was the only option they could foresee as viable. Even if we did attempt to use their debt counseling services to consolidate and reduce our credit payments, my day job income wasn’t even enough to cover our mortgage, car payment, insurance, and other normal bills.

Bankruptcy Certification

After looking at our bills and declaring us prime candidates for bankruptcy, our counselor offered to complete our counseling session as a bankruptcy counseling session, and provide us a certification of having taken the one to two hour course which cost $50. Knowing what we faced, and the inevitability of going broke, we took the course and prepared to declare bankruptcy.

The certification course was simple and easy. The counselor collected some written materials for us, and went page-by-page over the most important parts. We had already covered a great deal of the information in our debt counseling session, so the two overlapped. If you think bankruptcy is in your future, be prepared time- and money-wise to get your certification done with your debt counseling session. It will save you a return trip, and eliminate procrastination.

- James

What was your experience with debt counseling? What was your process for finding a debt counselor and using their services? Were you happy with the experience? Please feel free to comment below.