Debt Reduction Services

The phrase "debt reduction services" can mean the Boise, Idaho provider of credit counseling services, or a generic description of companies providing debt reduction services. To make this article short and easy to read, we will start with a description of credit counseling services, then look at Debt Reduction Services (the company) briefly, and conclude with a summary of your other options.

Credit Counseling Services at a Glance

Credit counselors offer debt reduction services online, over the telephone, or in person. Credit counseling services start with an hour-long counseling session where they help you develop a budget, advise you on managing your money and debts, offer no-cost educational materials and information on additional training. At the better companies, counselors are certified and trained in consumer credit, money management, and budgeting. Counselors review your entire financial situation, and help you develop a custom budget that solves your issue.

Counseling is only half of the credit counseling story. The other half is handling the debt, and that is where a credit counseling debt management plan (DMP) comes in. In a DMP, you send a payment to the credit counseling company each month. The company, in turn, pays your enrolled unsecured debts according to a payment schedule the counselor develops with you and your creditors. Enrollable debt includes:

• Credit card bills
• Student loans
• Medical bills

Typically, creditors agree to lower interest rates and waive certain fees. A DMP requires you to make regular payments to stay enrolled, and takes 5 years complete. A DMP has no credit score impact, but the fact you are in a DMP is noted on your credit report. A DMP cannot repair damaged credit or remove derogatory items on a credit report. A DMP is a red flag to most creditors, so do not expect to qualify for any vehicle loans or mortgages while enrolled in a DMP.

Look for three key items when you shop for a credit counselor:

1. Low-Pressure Sales Tactics: Good companies will send you free information about themselves and the services provided without requiring you to share any details about your situation. If a candidate company pressures you to enroll before you learn anything about it, go elsewhere. Also, good companies do not offer "one-time-only" specials. If credit counseling is right for you now, it will be right for you next week.
2. Accreditation: Look for a credit counseling company affiliated with either the National Foundation for Credit Counseling (NFCC) or the Association of Independent Consumer Credit Counseling (AICCCA). Affiliation is not a guarantee the credit counseling company will provide excellent service. However, no affiliations is a red flag the company may not follow industry best practices.
3. Disclosures: You should know the following before you sign on the dotted line:
   • Price and terms
   • Length of the plan
   • Which debts are included
   • If the creditors agree to participate
   • If you can afford the monthly payment for the duration of the DMP
   If you are unclear on any of these items, get them clarified before you enroll.

Debt Reduction Services at a Glance

Debt Reduction Services offers credit counseling services, debt management plans, and pre-bankruptcy counseling. It is a non-profit, and was founded in May 1996 in Boise, Idaho. The company joined the BBB shortly thereafter. Joseph Cestaro is the company’s CEO. The company has offices in Anchorage AK, Billings MT, Bohemia NY, Boise and Idaho Falls ID, Eugene OR, Spokane WA, and Tulsa OK. It offers services to people in 47 states.

According to the Boise BBB, the company has an A+ rating. Seven people complained to the Boise BBB about Debt Reduction Services in the last 3 years, and one in the last 12 months. All complaints were closed. Searching Google for complaints about Debt Reduction Services yielded no results. There is no indication in the company's online materials regarding the number of people it employs or the clients it serves annually.

Debt Reduction Services is a member of the AICCCA. The company operates the National Financial Education Center, and offers online educational materials regarding debt and personal finance on the Debt Reduction Services Web site.

Alternative Debt Reduction Services

People overwhelmed by debt have alternatives to credit counseling and a DMP. Two alternatives are debt settlement and bankruptcy.

Debt Settlement

Debt settlement programs typically take four years to complete. In contrast to DMPs, during the life of your debt settlement program, you are not paying creditors. Instead, you make payments to a special account that is used by the debt settlement provider to negotiate settlements with yoru creditors. This means debt settlement will negatively impact your credit rating for the term of your program. Inj comparison to a DMP, debt settlement is a faster and cheaper way to debt freedom.. The trade-off, however, is a negative credit rating and the possibility of litigation by aggressive creditors.

Bankruptcy

Both chapter 7 and chapter 13 bankruptcy are alternatives to DMPs and debt settlement. The advantage of bankruptcy is a speedy time to debt freedom if you qualify for chapter 7. If you do not qualify for chapter 7, then chapter 13 will keep creditors at bay while you and the bankruptcy trustee develop a repayment plan. At the end of a chapter 13 the remaining debt may be discharged or remain depending on your circumstances.

Summary

Weigh all of your debt reduction alternatives before you focus on one plan. If you hav a high credit score today and maintaining a high credit score is your highest priority, then look closely at a DMP. If you want to avoid bankruptcy, then consider debt settlement. If you qualify for chapter 7 bankruptcy, and a bankruptcy lawyer can tell you if you qualify, then that form of bankruptcy will discharge your debts quickly. If you do not qualify for chapter 7, then chapter 13 is a possibility, but debt settlement might resolve your debts faster.