Examples of income:
- Disability Benefits
Examples of expenditures:
- Utility Bills
After evaluating the expenses in comparison to the income, the credit counselor will be left with the individual or family’s disposable income. From this amount, the counselor will draw a reasonable figure for how much the individual should pay toward their debt each month with the goal of paying it down completely. Rather than a debtor paying each of their creditors individually, the debtor instead pays their chosen credit counseling organization who then deals with the creditors. Creditors can include credit card collection agencies or student lenders.
One of the major benefits of going through a credit counseling organization is that trusted and certified creditors are essentially working out your debts for you in the best possible way. These organizations can enter into agreements with creditors to lower interest rates and even waive certain fees. This is just one of the benefits of a DMP. Unfortunately, there are many scamming agencies out there posing as legitimate credit counseling agencies. The Federal Trade Commission (FTC) in attempts at protecting consumers has provided a list of trusted counselors across the country.
It is important for creditors to be informed by the debtors that they will be making payments through a DMP plan. This is the best way to ensure that there is no confusion. Creditors then must accept and agree to the new DMP on the conditions that: 1) the creditor makes regular payments on time; 2) the debtor thoroughly reads all monthly statements to ensure accuracy; and 3) debtors always contact their credit counseling agency if for some reason they are unable to make a payment.
The debtor is still responsible for their payments if the creditors are for some reason not being paid. Although the credit counseling agency is responsible for paying all creditors, responsibility for failure to pay could still land on the debtor and hurt their credit even further. Although there are many advantages to DMPs, there is also much responsibility that comes with them. To learn more, please do not hesitate to contact a Houston bankruptcy attorney from the firm today.