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Organization wants to save your credit rating

Consumer Credit Counseling working to prevent bankruptcies

Unemployment rates are low, the American economy is thriving and yet personal bankruptcies are increasing at a troubling rate.

Despite a favorable economy, many Americans are living beyond their means, all too often ending up in the lose/lose situation of bankruptcy.

But there is an interim step that can help people who are behind on their bills get a handle on their finances in order to avoid bankruptcy. Consumer Credit Counseling Service (CCCS), a non-profit community service organization, helps people meet their financial obligations while going through a credit crunch.

Ann Coleman, manager of the CCCS in Pascagoula and Biloxi, said if consumers are behind on debts and creditors are requesting several months payment at one time, CCCS can give people a restart so they can get back to the minimum monthly payment or even less.

“In most cases the creditors will make provisions to waive interest, lower the interest or, as a general rule, bring the account up to date with the credit bureau,” Coleman said. “It`s a good way that people can save their credit rating if they have been through a credit crunch.”

Coleman said most consumers who use the service have gotten in trouble because of lack of family budgeting combined with overspending.

“I think people overspend,” she said. “People shop using credit rather than cash. People stress shop, and they use credit cards for down payments on things when they can`t afford to buy them and shouldn`t buy them. They use credit cards for living expenses. They get their paycheck, spend their money, and then use credit to pay the bills. They are people who just want to live above their income.

I see it as mostly lack of self control combined with a lack of a family budget. And credit is very easy to get.”

While all types of people can get into trouble, Coleman said younger people in college or who have just gotten out of college are particularly prone to troubleThey want what their parents have immediately.

“They don`t want to wait,” Coleman said. “They want the new car, the new house and everything else when they first get married. They don`t want to live in an apartment. If they live in an apartment, they want to live in one of these $700a month ones.”

Sometimes naivete about credit can lead to consumers spending huge amounts to finance relatively small purchases. For example, an increasing number of companies nationwide advertise for consumers to call a 1-800 number for consolidating all of their high-interest credit card loans into a low-interest, tax-deductible mortgage loan. People who refinance their homes can then, for example, spread out a $10,000 debt over a 30-year repayment period, ending up paying an astronomical amount of interest.

“A lot of people are actually losing their homes because the mortgage keeps going up from consolidating all these debts into it,” Coleman said.

Although the companies advertise low interest loans, often it turns out that the consumer doesn`t qualify for the lower interest rate. Then high-pressure sales tactics can be used to talk the home owner into accepting a higher rate of interest. They`ll tell people that their mortgage will only go up $100 per month. But $100 per month spread out over 30 years amounts to $36,000.

The services provided by CCCS are free. An interview is set up that usually lasts 45 minutes or longer. Not everyone who comes in for the interview decides to use the program. Some learn enough to be able to handle their problems on their own.

When someone agrees to enter the CCCS program, they have to give up credit cards and sign contracts agreeing not to borrow any more money. They are required to budget some money for savings each month so money will be available for emergencies instead of relying on credit.

Sometimes CCCS recommends that clients consolidate some of the high-interest credit card debt into a lower-interest loan from their credit union. Payments are taken out of their paycheck, so there is never a temptation to spend that money rather than put it on bills.

There can be tendency for credit problems with military families. Coleman said military families are a prey for creditors, and are offered enormous amounts of credit.

CCCS, which has offices in every state, is funded by donations from creditors. Creditors support the organization because it helps prevent bankruptcy.

“We have many people that we help get out of debt,” Coleman said. “Most credit card companies have a graduate program for them, and will actually give them their credit card back after they finish the program.”

In addition to personal, confidential financial counseling services, CCCS has a number of brochures available on topics such as planning a family budget, how to resolve consumer disputes, and how to fix credit problems and save money.

Family counseling is often recommended because financial problems can cause arguments, extreme tension in the marriage, tension with raising children, and a loss of sleep. Arguments over finances are listed as one of the leading causes of divorce. If families refuse counseling, then self-help books at the library are recommended.

Coleman said she can`t overemphasize the importance of planning a family budget.

“Many families will go out and buy a car with a monthly payment $500 when they only have $200 in their budget for a car,” Coleman said. “They don`t know until later they can`t afford it because they didn`t know how much money they had available. The budget is the backbone of the family.”

About Becky Gillette

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