Episode 331: Getting Out of Debt: What Nonprofit Credit Counseling Can Do for You with Bruce McClary

Debt is one of the most emotionally charged topics in personal finance -- and one of the most common. This week Melissa Joy, CFP®, sits down with Bruce McClary, lead spokesperson for the National Foundation for Credit Counseling (NFCC), to take the stigma out of the conversation and walk through what it actually looks like to get professional help with debt. Whether you're watching balances creep up, fielding collection calls, or just feeling the financial squeeze of a world where credit card interest rates are hovering around 23%, this episode is for you.

Bruce brings decades of front-line experience as a former credit counselor, debt collector, and lender to the conversation. Together, he and Melissa break down how nonprofit credit counseling works, what a debt management plan (DMP) actually involves, and how it compares to for-profit debt settlement companies -- including the details those TV commercials conveniently leave out. They also cover when bankruptcy might be the right move and where to find trustworthy, low-cost help.

What You'll Learn

• Why debt struggles are more common than you think -- and affect households at all income levels
• What happens during a free initial credit counseling session with an NFCC member agency
• How a debt management plan (DMP) works, including reduced interest rates, eliminated fees, and account re-aging
• What unsecured debt is and which types of debt can be enrolled in a DMP
• The real math behind for-profit debt settlement programs -- and what those commercials don't tell you
• How student loans, medical bills, and other debt types fit into the bigger picture
• When bankruptcy might be a suitable option and how nonprofit counseling factors into that process
• Where to find a verified nonprofit credit counselor through NFCC.org or by calling 1-800-388-2227

The previous presentation by PEARL PLANNING was intended for general information purposes only.  No portion of the presentation serves as the receipt of, or as a substitute for, personalized investment advice from PEARL PLANNING or any other investment professional of your choosing. Different types of investments involve varying degrees of risk, and it should not be assumed that future performance of any specific investment or investment strategy, or any non-investment related or planning services, discussion or content, will be profitable, be suitable for your portfolio or individual situation, or prove successful. Neither PEARL PLANNING’s investment adviser registration status, nor any amount of prior experience or success, should be construed that a certain level of results or satisfaction will be achieved if PEARL PLANNING is engaged, or continues to be engaged, to provide investment advisory services. PEARL PLANNING is neither a law firm nor accounting firm, and no portion of its services should be construed as legal or accounting advice. No portion of the video content should be construed by a client or prospective client as a guarantee that he/she will experience a certain level of results if PEARL PLANNING is engaged, or continues to be engaged, to provide investment advisory services. A copy of PEARL PLANNING’s current written disclosure Brochure discussing our advisory services and fees is available upon request or at https...

Transcript

Welcome And What We Tackle

SPEAKER_01 0:01

Welcome to the Women's Money Wisdom Podcast. I'm Melissa Jolene, a certified financial planner and the founder of Perl Planning. My goal is to help you streamline and organize your finances, navigate big money decisions with confidence, and be strategic in order to grow your wealth. As a woman, you work hard for your money, and I'm here to help you make the most of it. Now let's get into the show. Welcome back to the Women's Money Wisdom podcast. Today we're going to be talking all about credit counseling, what to do when you have more debt than you can really work out and deal it with yourself. And I'm so pleased to have an expert in this field joining us for this discussion. Our guest, Bruce McLary, is the lead spokesperson for the National Foundation for Credit Counseling, which is the nation's largest network of nonprofit credit counseling organizations. Bruce has a background which includes work as a debt collector, a lender, and a former NFCC credit counselor himself. And he leverages that knowledge, an extensive history working with consumers who have debt to provide expertise on podcasts like this and elsewhere. So Bruce, welcome to the podcast.

SPEAKER_02 1:23

Hi Melissa, thanks, thanks for having me with you.

SPEAKER_01 1:27

Well, I know that for so many people, one of the most important parts of their personal finance journey is conquering debt, dealing with it. And, you know, it even when you've got debt under control, it can pop back up due to unexpected events or um, you know, just a series of um sometimes it's planned too. Um give me a little bit of lay of the land of what you see with your foundation in terms of, you know, kind of the state of affairs with Americans and their debt today.

Why Survival Debt Is Rising

SPEAKER_02 2:02

Yeah, a lot of people are struggling right now. And when we look at how people are managing their finances, and and debt is a big part of that, we're seeing that uh people are feeling a tremendous squeeze right now. There's a lot of financial pressure. Uh there's uh an affordability crisis right now for a lot of people uh where uh they might have uh had enough room in their budget five or six years ago uh to cover some of the necessities, but now there's less uh available money in their budget to cover those necessities. And so people are turning to debt to fill that gap in their budget, and they're leaning on debt in a way to help them survive. Uh so survival debt is a big issue, and people are carrying balances from month to month right now, more so than they have in the past. And the cost of carrying that debt is higher right now than it was uh, say a decade ago or two decades ago. Uh average interest rates on credit cards right now are roughly uh 23%, 22%, uh, which is extraordinarily high. And if you're carrying money from month to month, it means that more of your money is going to pay the interest. Uh, it's really hard to chip away at the principal balance. Uh, and then there's the issue of uh of people running out of room. If you're gap-filling your budget and you're in this cycle of survival debt, the the wall comes eventually because you run out of room to charge. And if you're carrying the balance month to month and you're not effectively able to pay it off. And so we're seeing more Americans hit that wall right now and run out of room to charge, and that's when things really get serious.

SPEAKER_03 3:42

Yeah.

SPEAKER_02 3:43

And uh, so a lot of people are in that situation. And one of the interesting things that we found uh about those who are entering into a debt crisis is that more people in the upper middle income category, uh, those who are higher wage earners, people making $60,000 a year, $70,000 a year, uh, even $80,000 a year, are uh finding themselves uh running into trouble and they're reaching out for help uh because their credit card debt uh and and other expenses have become unmanageable.

SPEAKER_01 4:16

And I mean, I've seen it, it's not um I've seen it in families making $200,000 a year or even more. Um you know, it it's not just um there's no means testing for having debt issues. And um, you know, uh so I know for some of our listeners out there, they may say this is the episode for me. Um, unfortunately, so we're really gonna make a goal of um first of all just normalizing that um you know, dealing with debt issues is something that for many of us, at least for a portion of our life, is something that um is just a fact of life. Um and so I guess I would start with just like mindset, and I know it can feel like such a shameful topic, but um just helping people here that you

Shame Free Steps Toward Help

SPEAKER_01 5:12

and I both know as financial experts that um you know just the average American um finds themselves in circumstances where they they carry debt that can be difficult to deal with and that's there's no judgment in this conversation.

SPEAKER_02 5:27

Yeah, that's exactly right. And that's a good place to start, uh, the judgment free zone, because uh in my experience as uh a credit counselor, as an NFCC certified credit counselor, uh years ago, right on the front lines of this, that's how we would approach these conversations. I'm not here to judge an individual for the decisions they made as they uh as their debt crisis grew. Uh, I'm here to help them out of a jam and I'm here to give them all the support they need to uh to make that possible and to achieve their financial goals and get past the crisis point. So, you know, we can spend hours beating ourselves up for all the bad financial decisions we've made, but it doesn't do anything to solve the problem in front of us. So I think it's a good mindset to be in if you're if you're struggling with debt and and if those if the shame is keeping you from reaching out, uh, just know that there are people who are ready to help that are not going to judge you if you need to reach out and get help. And that the first step in doing that isn't it's to stop beating up on yourself, uh, to stop criticizing the decisions you've made, to stop second guessing some of the things that you've done that might have uh either not helped your situation or made it worse. Uh, because now's the time to take a step back, look at your situation, and try to find solutions instead of focusing on the problems. It's a tough step to take because there is uh it's is a tremendous amount of shame and embarrassment in these situations. Uh, and unfortunately, but if because that prevents people from reaching out for help, uh, if you don't reach out and get help, or if you don't take action on your own to turn the situation around, uh, not doing anything can can make these situations much harder to resolve down the road.

SPEAKER_01 7:19

Right. That that interest compounding at you know much higher rates than a typical mortgage would be or something like that can really um that it can quickly escalate. Um, I guess we could could if we pause for a moment when you think about the work of a credit counselor, can you talk through the types of debts that we um you know are

What Credit Counseling Actually Covers

SPEAKER_01 7:44

associated with the work? So um, you know, there's all types of debt, and let's just like make a laundry list of what we're talking about so we can get a lay of the land.

SPEAKER_02 7:54

Yeah, sure. And again, uh in the world of nonprofit credit counseling, I think the first thing to understand is that when you reach out and you talk to a credit counselor, uh, and if you do it by reaching out to an NFCC certified credit counselor, uh the initial review is free. So your your uh your time with that counselor is free, and it gives you an opportunity to uh go through a full review of your financial situation, your budget, your income, the debt that you owe, uh, the biggest challenges you have in front of you, what is at the crisis point, what deserves immediate attention, and then they can help you put together an action plan and they'll look at all of your debt, your entire financial situation, so your student loans, your mortgage, uh, you know, all sources of income, uh any debts that are in collection, unpaid bills, yeah, all of that. So that's part of that review. So that's completely free of charge. These are nonprofit organizations uh that are part of the NFCC. So that's one thing you can take advantage of there. But if you need to take an extra step and you need something that's more directly prescriptive, uh, and you need a structured repayment program, then we're talking about specific types of debts that can be enrolled in these programs that help you repay your debt affordably, reduce interest rates, uh stop the late fees and over limit fees and the collection calls and ultimately get you out of debt in about uh three to four, uh sometimes five years. Uh but the debts that you can enroll in those programs are unsecured debts. So those are debts that are not collateralized. And most commonly people associate that category with credit cards because credit cards are not collateralized debts. So your credit card debt, uh signature loans, if you have signature loans with a finance company or a bank or credit union, uh if there's no collateral loans.

SPEAKER_01 9:45

Are those sometimes called like personal loans or personal loans?

SPEAKER_02 9:49

Uh so those non-collateralized uh types of financing can go into these debt management plans, these DMPs, as they're often called. And then you can uh benefit from uh the reduced payments, reduced interest, uh the elimination of late and over limit fees. And for your credit cards, the major creditors will re-age your account upon enrollment, which means if you're two or three months past due, as soon as they accept the plan, the repayment plan, uh, once you make that first payment, uh, they'll adjust the account automatically back up to date. So instead of having to pay hundreds and hundreds of dollars to get your account back into paid as agreed status, uh, that happens uh at that point where they accept the plan. So there are a lot of benefits there uh that you know help people get over the hump because if you think about it, all the late fees, uh the penalties, the high interest rate are working against people who are past due, just uh preventing them from getting back up to date. Uh so that barrier is eliminated upon enrollment. And then people generally uh finish these plans in, as I mentioned, about uh uh three to five years, depending on the amount of debt enrolled.

SPEAKER_01 11:07

Okay. And so the like maybe we can go into the structure of the um nonprofit-oriented credit counselors. So, first of all, you mentioned already initial call, like an initial consult is free of charge. Um, but then there are also the uh there are plans that you can do for a more formalized um commitment to um basically um restructuring so that you can get on top of things with counseling. Is that correct?

SPEAKER_02 11:41

Yes, that's correct. So when you when you when you make your initial contact with a nonprofit credit counseling agency and you go into the counseling session, you go through that initial assessment, the conversation about the debt you owe, the income you make, your overall financial situation,

How A Debt Management Plan Works

SPEAKER_02 11:58

and you're given an action plan. And in many cases, that action plan gives you uh options where you can uh take a DIY approach if you want. Okay, uh, or you can enroll in a debt management plan uh if your situation uh might need a little bit more direct assistance in structure.

SPEAKER_01 12:18

Got it. And for there are economics involved with the nonprofit credit counselors. How are they um compensated for, like, how is the their organizations compensated for providing this assistance?

SPEAKER_02 12:34

Yeah, the the benefit of working with a nonprofit is that there's uh the the organization receives uh funding, contributions to offset the cost of services to the consumer. So there's uh the the major creditors, the banks, uh others who have an interest in financial well-being will contribute to nonprofit credit counseling agencies uh and associations to help them provide these services at low or no cost to consumers. Uh and where there are fees that are charged to consumers, uh they're significantly reduced because of their because they're offset by those uh contributions from uh from creditors and others who are supporting the mission of these nonprofits. But there may still be fees that are charged to consumers. And uh when you're enrolled in the structured repayment plan, that's more typically where those fees will show up. And there's usually an enrollment fee that averages uh somewhere between uh $25 to $50 one-time charge uh to activate the program. Uh, and then there can be fees, monthly fees, uh in a similar range that are for administering the program month to month, but those fees are more than offset by the payment reductions, the interest rate reductions, and uh the the elimination of late and over limit fees uh over the course of repayment.

SPEAKER_01 14:00

Got it. What do you see then um for the people that are successful in these types of programs? Can you give me, you know, just anecdotal stories of um the impact that having the opportunity for a program like this may have?

SPEAKER_02 14:17

Yeah, there's so many stories uh that I can draw from that really illustrate the significant life-changing impact of these programs. And I think you'll find, and a lot of those you'll find on our uh YouTube page if you go to the NFCC, nfcc.org, uh you click on the YouTube icon, you can go there and you can hear some of the stories directly from the people who were helped uh that talk about some of the ways that their lives uh have changed because of uh being enrolled in the program. But I would say that uh, you know, a couple of uh I guess a couple of typical scenarios are where people are um you know drowning in credit card debt, they're getting collection calls because they're already a payment or two past due. Uh the debt collectors are increasing pressure uh on individuals to pay up and get caught uh caught up to date, uh, but the money just isn't there. And so uh you know, late fees, over limit fees start to pile up and they reach out, they stop that process uh that could have gone uh to another level uh if if the accounts continue to go unpaid, uh the accounts will charge off, and then creditors can sue you for the money that you owe. They'll shut the account down, it damages your credit. And instead of ending up in that situation, uh three to five years later, they're completely debt-free, and they have all of this money that they were paying to their creditors that they can now pay themselves and invest and put in savings or uh use towards achieving some kind of a life goal that they had. Uh, so a lot of the people that I helped directly uh were renters when they entered the program, uh, but they were homeowners when they exited the program because their situation turned around so much, uh, their credit improved significantly, their financial stability improved, they were able to set aside money in a savings account to put a down payment uh on a home. And so, you know, it can it can it can turn somebody's situation around that significantly uh over the course of several years.

SPEAKER_01 16:26

That's amazing. Can you um I guess are you is your credit frozen while you're participating in these programs, or you still have access to credit? Um, you know, you describe someone who was a homeowner by the end of the program, but um give me a lay of the land on you know kind of the fair play rules there.

SPEAKER_02 16:47

Well, the there are some fair play rules, and first of all, it doesn't help your situation if you're getting into more debt as you're trying to get out of debt with the accounts that are enrolled. So just as a best practice, it's not a good idea uh to keep uh revolving charge accounts open on the side while you're trying to pay down some of the other debts that are in the program. And so it's important to enroll the all the uh revolving charge accounts in the program to pay off that debt. Uh now, you know, it's it's acceptable in some circumstances if you need to have an account to cover business travel expenses or things like that. Sure. Uh then you can have uh one credit card off uh open outside the program. Uh, but again, you don't want to give yourself enough room.

SPEAKER_01 17:40

You're not maxing for points, yeah. Yeah to you're gonna have some lifestyle changes or some some cash flow changes.

SPEAKER_02 17:47

Yeah, there are significant lifestyle changes that need to occur in some cases, but yeah, that the breaking that dependence on debt uh is is key to the success of the program. So you want to try to avoid uh getting back in the same situation you were in before. Uh so enrolling the accounts on the program. The accounts that are enrolled on the program uh have to be closed. So the creditors will require, as a condition of the program, that the accounts are closed. And in many cases, they already are because sometimes people enroll in the program at the point where their creditor has already closed the account because it's so far past due.

SPEAKER_03 18:23

Yeah.

SPEAKER_02 18:23

So a lot of people who are entering the program as they're deep in a financial crisis, that's already the case. But for some, it's not the case. Uh, so they just have to know that the accounts are going to be closed in the program, which does cause your credit score to drop a little bit more upon enrollment because the creditor is closing your account. But the rebound in your credit score is significant over time on the program because you're reducing the amount of debt you have. So that means that uh you're not bumping up as close to your credit limit as you were before. So that's a positive. And once the creditors reage the accounts, as long as you're making the payments on time, uh, then it will reflect on your credit and you should see a rebound in your credit score. So credit improves over time. But on that initial period of enrollment, because the accounts have to be closed, uh, it can take a little bit of a dip.

SPEAKER_01 19:19

Got it. And um just mentioning one of the biggest um sources of debt nowadays is student loans, those typically, correct me if I'm wrong, are not able to be part of these types

Credit Score Changes And Closed Cards

SPEAKER_01 19:33

of programs. Is that correct?

SPEAKER_02 19:35

That is correct. But many nonprofit credit counseling agencies, especially those that are affiliated with the National Foundation for Credit Counseling, can help you uh understand your options for affordable student loan repayment.

SPEAKER_01 19:47

And integrate that into the overall big picture.

SPEAKER_02 19:50

Yes, exactly, because the credit card debt doesn't live in a vacuum. So you probably not only have student loan debt, you have uh auto loan, uh, you've got rent, mortgage, medical bills. Yeah, and some medical bills can be enrolled in the program because that's not collateralized debt. So uh the working with care providers across the country, uh uh nonprofit credit counseling agencies can put medical bills uh on a debt management plan in many cases. But for the student loan debt, you can get uh professional advice, guidance on how to manage that student loan debt, whether it is federally guaranteed student loan debt or whether it's private student loan debt. So you can also get advice there as well.

SPEAKER_01 20:29

Makes sense. Now, what are some of the other um well, first of all, I mentioned you mentioned the DIY strategies. So sometimes I see people they're carrying credit card debt that inches up. Um and there are alternative places that you can access funds. One of the things I see as a financial planner are people that receive equity compensation. Sometimes the tax the um their debt piles up because they have a bigger tax bill, because um some of that equity comp rel requires you to pay more taxes. Um and yet they have this unsold stock, for example, that might have an additional tax bill, but um, you know, there's access to funds there and there's also this debt. And it's like, hey, let's talk about using some of those funds to pay off the debt that's being generated from the taxes associated with these funds to begin with. I mean, that's not the only case, but there can be some situations where when you look at the balance sheet, um, you know, you got the options, you just didn't know you could touch them or or didn't want to.

SPEAKER_02 21:34

Yeah, and again, this goes back to the mindset, the crisis mindset that people can be in when they're getting debt collection calls, when they're seeing that their debt is becoming less manageable and they're getting concerned. Uh, it can lead you to over uh to a point where you're overlooking some of the options that are right in front of you uh that you may have. Uh, but even when you're able to see clear to those options, uh, it may help to get some guidance as to uh Uh, which are the most suitable for you? Uh, because suitability is incredibly important here, especially when you're looking at the assets you have and deciding, okay, can I apply some of these assets to this uh this debt uh challenge here to resolve that? Or is it better to try to resolve it directly with the creditors and leave those assets alone? Uh so that's where it really helps to reach out and get some professional guidance because you're down in the trenches. Uh sometimes a financial professional is able to take a look from a different perspective and see clear through all the fog in the trenches and help you uh uh help guide you to a point where you're making uh a better decision for yourself based on suitability.

SPEAKER_01 22:42

It's so nice to get a second pair of eyes. I just wanted to talk about the other, you know, kind of solutions that are out there. So, you know, we talked about sometimes there's a game plan, but you can self-implement DIY, um, the nonprofit credit counselor options. Who else is like reaching out to people under duress who are stressed about debt, um looking to provide a solution, whether it's recommended or not?

SPEAKER_02 23:09

Yeah, well, I'm sure you don't have to spend more than uh uh 15 or 20 minutes uh flipping channels on your TV to see debt settlement commercials. Uh these are for-profit companies that are offering to uh make your debt disappear, which is uh the way the ad sounds. They'll settle your debt for pennies on the

Student Loans Medical Bills And More

SPEAKER_02 23:27

dollar, and they tout uh extraordinary results, uh settling more than half your debt. You can just walk away from it, and they'll tell you that you don't have to pay, you shouldn't pay.

SPEAKER_01 23:38

Uh sounds too good to be true. Tell me what the um, you know, we each come in with our own biases, but what what actually happens in most cases for those types of situations?

SPEAKER_02 23:50

Well, in these in these situations, there's a lot they don't tell you in the ad. The devil is in the details, and the details uh you don't see on screen in a 60-second ad. And so you have to be careful because this is another instance where suitability is very critical. Sure, you'll probably hear some people, some stories of people who succeeded on a debt uh settlement program, uh, but it's not for everybody. Uh but with these debt settlement companies, they apply the same solution to everybody's problem, no matter how different the problems or circumstances may be. And one size fits all doesn't really fit all.

SPEAKER_03 24:24

Okay.

SPEAKER_02 24:24

And so uh if you go into a debt settlement program, you have to understand a couple of things. For-profit debt settlement companies are going to uh enroll your debt in the program, and they'll enroll debt that's not even behind, it's not even past due. So they'll just put it all in there. And while they're negotiating with the uh creditors that you owe, as a tactic, they will advise you to stop paying all of your creditors. So no more payments, don't pay them a penny during the negotiation process.

SPEAKER_01 24:54

But instead So you look uncollectible, which gives them negotiating leverage, but also can harm you in a way that is worse than you started.

SPEAKER_02 25:04

Exactly. In theory, it's supposed to it's supposed to reinforce their negotiating position on your behalf, but in reality, it makes your situation exponentially worse. More documentary and yeah, and while you're not sending payments to the uh to the creditors, you're putting money into a trust account that they've set up so that you're just accumulating money so that once there is a settlement reached, uh that can be applied towards the the settlement amount. Uh and then they're going to start charging you fees. And typically the fees they charge you equal about 30% of the settled debt.

SPEAKER_01 25:37

Uh so that's that can be a pretty steep fee if uh So 30% of your debt outstanding or 30% of what you end up paying.

SPEAKER_02 25:47

It's it's 30% of the amount that they settle. So if they successfully settle uh 50% of your debt, then you know 30% of that is what you're gonna owe them in fees.

SPEAKER_01 25:57

Aaron Powell And when you say successfully settle, so you start with $100,000 of unsecured debt, they negotiate it down to $50,000, and then there's a fee of 30%. So $15,000 is the fee. So you end up paying $65,000 between what you have to pay to the creditors as well as what you're paying to the the settlement consultant or yes, that's that's generally the math there. So and then what does your credit look like after that?

SPEAKER_02 26:24

Well, there's a couple of things here that that can impact that. First of all, uh there it is it is widely known that debt settlement companies, for-profit debt settlement companies, are not 100% successful in their negotiations. So either they're not gonna settle your debt as much as you might have expected, or there may be some accounts where they can't reach a settlement with the creditor at all. So, what then happens if you haven't been paying that creditor for six or seven months or eight months or longer, uh, the creditor is gonna get a little impatient. And so they're gonna escalate the account collection activity, and they could even sue you for the debt that you owe. Uh, so you've torpedoed your credit. There's you know nothing good that's gonna come out of this at the end when it comes to your credit report, and you look at what happens when you're not paying. But even worse, uh, you could put yourself in a very vulnerable position with your creditors because they may just turn around and sue you. Uh, and with some of the for-profit debt settlement companies, they have people sign limited power of a gr uh of attorney uh at the beginning because they're going to be negotiating on behalf of the consumer. Uh, so they they need access to the accounts. But what they're also doing is preventing you from receiving communication directly from the creditor. So all the while, you don't have any indication of how much worse your situation is getting uh as you're going through the negotiation process. So it's a really rough process, not always successful, and it can be very costly.

SPEAKER_01 27:55

And so I would assume if you were contemplating that option, that you would also be available that the um nonprofit credit counselors would be available to provide a second opinion, perhaps if you haven't signed on the bottom line.

SPEAKER_02 28:11

Yeah, I think the another way to look at that is if if you have a nonprofit credit counseling option and you know that the initial assessment is free and there's no cost, and they're gonna look at your entire financial situation and they're gonna give you an action plan that presents all of the options and explains the options, including uh debt settlement, uh, but also options like bankruptcy and

The Hidden Costs Of Debt Settlement

SPEAKER_02 28:35

other things that you might be considering, uh, then you can make an informed choice uh for yourself and put yourself in a better situation. So, yes, maybe you're in such a dire situation that all the wreckage that could potentially be caused by this the settlement process uh isn't doesn't seem as bad because you're already at the point of no return. So, yeah, maybe settlement could work. Uh, but if you're not that far down the line uh with debt collection and pending creditor lawsuits, maybe you should consider a different option. So that's that's your opportunity with that initial assessment to take a step back, look at all your options, ask questions from a financial expert to help you understand them more clearly, and then make the decision.

SPEAKER_01 29:21

Makes sense. And then in some cases, is bankruptcy a a reasonable or perhaps um uh a decision that a credit counselor might endorse for some certain people?

SPEAKER_02 29:36

Well, it's certainly a decision that that a credit counselor will help people understand more clearly. Ultimately, the individual, the consumer, has to make that choice for themselves.

SPEAKER_03 29:45

Makes sense.

SPEAKER_02 29:46

Uh, but uh nonprofit credit counseling is actually a required step in filing personal bankruptcy. If you're filing chapter seven or chapter 13, uh the if you go to a bankruptcy attorney, they're gonna send you back to a nonprofit credit counseling agency for that uh for that extra step to help you better understand bankruptcy and explore alternatives if those exist. And if they don't exist, uh then you just go right back to the bankruptcy attorney with your certificate from the counseling session and you can proceed with filing.

SPEAKER_01 30:18

Makes sense. And we've had a bankruptcy attorney on the podcast in the past. Um, you know, all options are um something that probably should be considered. And there may be some cases where someone decides that bankruptcy is the right route. So um, you know, not to diminish that possibility at all.

SPEAKER_02 30:40

Yeah. So it's there's certainly uh uh cases where it is it is a suitable option in some circumstances. So uh the counselors understand that, uh, they recognize that, and they can help an individual uh, you know, uh more clearly understand the bankruptcy process before they go through the next steps, if that is the case. So the counselor is going to be supportive, whatever the individual decides uh might be the most suitable route.

SPEAKER_01 31:06

Are there any other underappreciated or um you know kind of less known tactics that might be useful for people to be aware of that credit counselors utilize?

SPEAKER_02 31:19

Uh that's a really good question. Uh, you know, apart from well, when you when you when you enter into uh the initial assessment process, the the counselor is looking at your unique circumstances. So you're not it's not like going out to a blog and getting one size fits all advice on how to manage a budget. Or a podcast, right? Or or a podcast, yeah. So it's one-on-one coaching that takes place in that. So there's a lot of really good advice that can apply to a person's individual circumstances, unique circumstances that can be shared in the course of that assessment. In and it's and it's all confidential. So this is these sessions take place one-on-one, they're confidential. Uh so you can get some really good advice based on uh your unique circumstances in how to manage the debt that you have in front of you. And there could be circumstances where uh an individual might not be uh at a point where their credit has taken a hit, but they feel the financial pressure.

SPEAKER_01 32:20

So there may be some tactics that can be used to, I guess, reshuffle the debt a little bit creatively, like a balance transfer or something like that, often with a fee, but then there's a relief period where you you kind of have a period of time with lower um payment or lower interest to try to catch up or get things.

SPEAKER_02 32:42

Right. If there's an introductory offer uh of 0% or a reduced interest rate uh that takes a little bit of the interest rate pressure off, and if it is affordable, uh a counselor can help somebody put together a plan to pay off the debt during that uh in that that teaser rate period uh to get the most out of it. And in some cases that that can happen. Uh there can also be very complicated circumstances. I used to work with a lot of couples that were divorced but wanted to go into a program uh to untangle some of the debt obligations they had, but work out an affordable repayment plan.

SPEAKER_01 33:19

Yeah, a lot of times the debt accumulated in marriage, even if it's only accumulated on, you know, his or hers or his or his, like one side of the aisle, gets divvied up between the two of you at the point in time that you mediate a divorce or settle on a divorce.

SPEAKER_02 33:38

Yeah, so those situations can very be very tricky. And it's always good to have a financial professional who can maybe help out a little bit. Uh so in in situations where debt is unmanageable on both sides of the equation, uh, nonprofit credit counseling can be a tremendous help there as well. So there are a lot of unique situations, challenging situations where you can benefit from talking to a nonprofit credit counselor.

SPEAKER_01 34:02

So helpful, Bruce. Um, for those of the us that are that for our listeners who are either thinking, gosh, this episode, I feel that I feel the anxiety, I feel the stress of debt and want to have deeper conversations. First of all, um, I I'm so glad that people know uh based on this episode about the work that nonprofit credit counselors do. Also, this is you know part of the discussions that financial planners have every day as well. Um, but where can people get started to find a nonprofit credit counselor and you know determine that they're not um you know for-profit um debt negotiators?

SPEAKER_02 34:43

Yeah, the first stop can be uh the National Foundation for Credit Counseling website, nfcc.org. Okay. All of the uh credit counseling agencies that are part of the NFCC network are nonprofit. These are nonprofit organizations. So

When Bankruptcy Becomes The Right Tool

SPEAKER_02 34:58

you if you find an agency by connecting through the National Foundation for Credit Counseling website, nfcc.org, you are guaranteed that agency is a nonprofit agency. And they'll be able to help you with uh a wide range of issues. And when you go to the NFCC website, if you go to nfcc.org and you connect to a counselor, you can indicate what type of help you need. Maybe you need help with a budget, maybe you need help dealing with uh debt issues with credit cards, or maybe you need to avoid foreclosure, or maybe you're uh struggling with student loan debt. So there are all kinds of different things uh that you can uh that you can address when you're when you're connecting with a counselor through the NFCC website. So nfcc.org, there's also a toll-free number, 1-800-388-2227. Uh so if you'd rather talk to a counselor by phone, you can do that too. And I would emphasize in this age of AI, you're talking to real people. These are real human beings, financial experts uh who can help you with your problems. So you're not dealing with AI, you're not dealing with a bot. Uh, we'll connect you with real people who can help you with your real life problems.

SPEAKER_01 36:10

Yeah, I think that, you know, in an age where I see a lot of it um value to AI in terms of personal finance, it's also important to remember that the experiences and at-bats for your own personal situation is much more complex than the typical bot can deal with nowadays. And there's also something that um is so important in the work that you do, Bruce, or your credit counselors do, as well as the work that I do, which is that it's not just the dollars and cents, it's also your mindset, your approach to money, you know, uh affirmations of positive um, you know, kind of behaviors or habits, as well as work together to acknowledge where there may be weaknesses or vulnerabilities that need to be addressed. And um, that psychology is, you know, you can you can get some of the way there on a chat, but I think like to address the level of complexity in a way that is kosher, I would strongly encourage people to not just use a chat to address your issues, but also seek um human advice.

SPEAKER_02 37:20

Yes, that is good advice. And they're, you know, just from practical experience as a counselor, knowing that there are all kinds of different nuances and things that, you know, an AI bot or a chat won't factor when rendering solutions. And it's it's not quite at the point where the bot's uh gonna be able to uh to navigate that to get you to exactly the right point you need to be. So I think it's very important to talk to a human being who can empathize, uh who can provide advice and who can uh and do that in an environment where it's safe for you to share and you're not being judged.

SPEAKER_01 37:56

Yeah, makes so much

Finding A Nonprofit Counselor And Closing

SPEAKER_01 37:58

sense. Well, Bruce, thank you so much for joining the conversation. Um, I really appreciated it. And I know there are people out there that are going to appreciate the resources that you've shared as well.

SPEAKER_02 38:10

Thanks. Thanks so much for having me on the on the podcast, Melissa.

SPEAKER_00 38:23

Thank you for listening to the Women's Money Wisdom Podcast. If you found value in this episode, the best way that you can support the podcast is to forward an episode to a friend or leave a review. Go to proplan.com and the podcast link to get all the resources and links mentioned. This presentation by Pro Planning is intended for general information purposes only. No portion of this presentation serves as a receipt of or a substitute for personal investment advice from Pro Planning or any other investment professional of your choosing. Copies of Pro Planning's current rent and disclosure brochure and from CRS discussing our advisory services and fees are available upon request or on our website platform at proplan.com. The information that we share is meant to educate and inspire, not serve as personalized financial advice. Everyone's situation is unique, so be sure to consult with your own financial professional for guidance that fits your life. And just so you know, the opinions shared in this podcast are Melissa's own and those of her guests. They don't necessarily represent any organizations with which Melissa is affiliated. For more important disclosures, please go to our webpage at proplan.com.