• Guarantee they can remove your unsecured debt.

• Promise that unsecured debts can be paid off at 10 to 50 percent of the balance.

• Require substantial monthly service fees higher than $50, or a percentage of the balance.

• Demand payment of a percentage of the amount they are "saving you".

• Tell you to stop making payments to or communicating with your creditors.

• Require you to make monthly payments to them, rather than with your creditor.

• Claim that creditors never sue consumers for non-payment of unsecured debt.

• Promise that using their system will have no negative impact on your credit report.

• Claim that they can remove negative information from your credit report, even if it is accurate.

• Pressure you to make what they call "voluntary contributions." Reputable credit counselors present their fees upfront and are never a percentage of your debt. (2)

Other Red Flags include:

• Your initial meeting last less than 30 minutes.

• They claim it's not necessary to come in for a person to person interview and can instead conduct it over the telephone or by internet.

• They try to push you into a DMP without really evaluating your situation. Reputable credit counselors offer other valuable services besides a DMP and a DMP may not be right for everyone.

• Insists that you make an immediate decision.

To avoid getting involved with a credit counselor that will do you more harm than good, follow this criteria when choosing a credit counselor:

• Check to see if they are accredited by the two oldest and most reputable accredited agencies the National Foundation for Credit Counseling (NFCC) and the Association of Independent Consumer Credit Counseling Agencies (AICCCA). Members of these organizations have to go through a thorough accreditation process guided by independent third-party organizations which carefully review the operating standards and effectiveness of the credit counselors.

• Just because they are non-profit, doesn't mean you don't have to pay. However, both the NFCC and AICCCA have strict guidelines about their fees which usually cost $50 to $100 to start an account and around $50 a month to manage a DMP. Some will waive the fees if you are financially destitute.

• Provide you with monthly statements showing where your money is going under a DMP.

• No matter the accreditation, you should still check on an agency with the Better Business Bureau and your State Attorney General's office. Unanswered or unresolved complaints should be red flags for you to go elsewhere.

• Verbal statements are backed up in writing and all payments garner statements and receipts so you can see where your money is going.

Summary

Credit counseling agencies can help you get your negative financial situation under control and on the path toward living debt free. Despite the invaluable assistance they can provide to debtors, only half successfully complete the Debt Management Plan, states the NFCC. Credit counselors can give you the tools to succeed, but they can't solve your problems for you. Debtors have to be focused, committed and disciplined enough to take the tools credit counselors give them and use them to pay down their debts and work their way out of the prison of debt. Credit counseling is viewed as win-win for debtors and creditors and the best alternative to bankruptcy. This viewpoint is backed by the 2005 Bankruptcy Abuse Prevention and Consumer Protection Act which requires credit counseling for debtors 180 days before they can file a bankruptcy claim.