Using A Licensed Budget Planner

What is debt?

Debt is money that you have borrowed and still owe for goods and services you have purchased. You don’t have to go on a wild spending spree to create a debt crisis. Debt can arise from emergency situations outside of one’s control; but more often, a consistent pattern of spending even just a little more than you make, over time, can lead to an unsafe or unmanageable amount of debt. The key to gaining control of your debt is to first identify what is good debt and what is bad debt, and then pay off the bad debt.

Good debt vs. bad debt:

  • Good debt is debt you have on items you need but can"t afford to pay for up front without using all of your cash reserves or liquidating your investments. It is debt that can be considered an investment and can help you build your credit rating if paid on time, such as a mortgage, car loan or student loan.
  • Bad debt is debt you"ve taken on for things you don"t really need and can"t afford. One of the worst forms of bad debt is credit card debt, since it often carries high interest rates.

What can be done once debt becomes unmanageable?

  • Do not continue to borrow if you can’t make monthly payments towards the debt. Reserve your credit cards for emergencies. Try not to add to your debt load by making additional or unnecessary purchases.
  • Do not use your credit card to borrow cash.
  • Create a budget for income, and a debt payment plan. Do not spend more than you earn.
  • Use your debit card, not your credit card, to make purchases.
  • Pay more than the minimum amount due on your credit card every month.
  • Talk to an authorized account representative at your credit card company as soon as possible about lowering your interest rate and, if possible, arranging a payment schedule. 
  • As soon as a credit card account is completely paid off, destroy the card and close the account.
  • If all else fails, consider using the services of a New York State licensed budget planner that might be able to help you pay off your debt.

What is a budget planner?

  • Budget planners help consumers pay off unmanageable unsecured debt. They can contact creditors to help arrange lower fees and interest rates (sometimes with better results than a consumer could normally negotiate) and can create a reasonable debt consolidation and/or repayment plan.

Who benefits from using a budget planner?

  • Anyone who is behind on bill payments to creditors can consider using a licensed budget planner.
  • Anyone who is considering bankruptcy may also benefit from budget planning.  Declaring bankruptcy is usually the last resort anyone should take to solve financial problems. A bankruptcy petition can stay on your credit report for up to 10 years.

What services do budget planners provide and at what cost?

  • For a fee, a budget planner will analyze debt load and recommend a strict budget, handle consolidated debt repayment or, in some cases, recommend bankruptcy.
  • They can help reduce monthly fees and lower interest rates, arrange to have late charges waived and over-limit charges dropped, and have accounts returned from delinquent status to good standing in addition to stopping any harassing phone calls that a consumer might receive from creditors.
  • In the case of consolidated debt repayment, credit counselors will renegotiate interest rates with each creditor.
  • Budget planning is not free. Some budget planners charge little or nothing for managing a plan and still others charge a flat initial fee (usually under $75) and then a monthly fee (usually less than $50).

What to ask a budget planner about the services it offers:

  • Is your company licensed by the New York State Department of Financial Services?
  • Are your company’s counselors accredited or certified? If not, how are they trained?
  • Is client money put in a separate trust account from your company’s operating funds?
  • Is there a minimum debt required to use your company’s services?
  • Will I have a formal written agreement or contract with your company?
  • What is your initial fee? How is the amount of the monthly payment determined? Under what circumstances will you waive the initial and/or monthly fees?
  • How long do you hold my monthly payment before disbursing it among my creditors? 
  • Will I work with one counselor or several?
  • Does your company offer free educational materials? If so, will you send them to me?
  • What assurance is there that personal information about me will be kept confidential?

What to ask a budget planner about your account:

  • Is a debt repayment plan my only option?
  • Do you work with my particular creditors?
  • Can you have my creditors lower or eliminate interest and finance charges or waive late fees?
  • How will I know my creditors have received payments?
  • What are the consequences if I skip a monthly payment?
  • What are the consequences if I am not able to complete the program?
  • What will my monthly fee be?
  • How often will I receive reports on my account?
  • Am I able to access my accounts online or by phone?
  • Will you help me develop a plan for avoiding debt-related problems in the future?
  • Should I use my credit cards or apply for a new credit card while I am undergoing debt consolidation?
  • How soon can I begin my debt repayment plan? 
  • How long will it take to get out of debt?
  • Will credit counseling show up on my credit report?  If not, why not?

When choosing a budget planner, consider the following:

  • Legitimate debt consolidation plans should never involve taking out new loans.
  • Legitimate debt consolidation plans should never exceed (60) months.
  • Never give out personal information, like a Social Security number or bank account number, over the phone.
  • Your secured debts are not included in your repayment plan.  You must continue to make payments to those creditors directly. If you fall behind on your mortgage, contact the lender immediately to avoid foreclosure.
  • Shop around. Compare the services and fees of at least three licensed budget planners before you settle on the planner or plan that best suits your needs.
  • Some universities, military bases, credit unions and housing authorities offer free or low-cost budget counseling.
  • Use budget planners that are licensed by the New York State Department of Financial Services.

A list of currently licensed budget planners can be found via our Who We Supervise search application.