Find a Credit Counseling Agency

A for-profit credit counseling firm is sometimes referred to as a debt relief company. Debt relief companies have a profit motive. This profit motive can cause a debt relief company to put their interests above your interests. A nonprofit credit counseling agency has no such motivation to put their interests above your interests. To make sure you are dealing with a reputable nonprofit agency, see if they are a member of the National Foundation for Credit Counseling (NFCC). The NFCC requires that its member agencies follow certain guidelines to protect their clients. If you want to do some background checking before deciding on an agency, do a search on the Better Business Bureau's website to see the rating of the agency. 

While credit counseling should always be free, the agency may charge a fee for some services like a Hawaii debt management plan. If you can't afford to pay the fee, ask if they waive fees in extreme cases. Most reputable credit counseling organizations will waive the fees. If you think you can't pay the fee, the credit counseling agency will determine if you are eligible for a fee waiver.

All counseling organizations aren’t the same. Some agencies may offer credit counseling, debt management plans, bankruptcy counseling, student loan counseling, foreclosure counseling and more. Other agencies may only offer credit counseling and debt management plans. Some agencies may only do telephone or online counseling sessions. Other agencies may offer you a choice of online, telephone, or in-person counseling sessions. Figure out what works best for you and find an agency that offers these options.

What to Expect at Credit Counseling

For your initial counseling session, you will need to have documentation available to give a general overview of your monthly expenses, debt payments, and monthly income. Some of the most important debts to cover are unsecured debts such as credit card debts and medical bills. These documents would include bank account statements, pay stubs, and bills. These initial sessions take forty-five minutes to an hour. All information you provide to your credit counselor is confidential. Your creditors aren't involved at this point. After assessing your income, expenses, and debts, your counselor will recommend a debt solution. Your counselor will design this solution for your specific financial situation. They may recommend a Hawaii DMP or they may recommend another option.

Making the Decision & Getting Started

There are some questions to ask your counselor before choosing a Hawaii debt management plan. You will want to know what the set-up fee and the monthly fee will be for your debt management program. These fees will only pay for the counseling agency and will not reduce your debts. You need to ask if the credit counselor gets a commission or another incentive for advising you to choose one debt relief option over another. If your counselor does receive incentives to “sell” you on a particular plan, you need to find another counselor. It's important to know about the relationship the agency has with your creditors. 

The most important question is a question you need to ask yourself. Do you feel comfortable that you will be able to make the sacrifices that may be necessary to stay on budget?

Put Together Your Hawaii Debt Management Plan

To set up your Hawaii debt management plan, your credit counselor will need more detailed information than you provided in your initial session. The counseling agency will need detailed bank account information and credit card account information. Your counselor will need the credit card agreement for all your credit cards. The counselor needs these agreements when negotiating with credit card companies. The counselor will usually get this agreement from the Consumer Financial Protection Bureau's Credit Card Agreement Database. The creditors do get a say in your debt management plan. Their say occurs when the creditors negotiate with your counseling agency. In most cases, the credit counseling firm has a stronger hand than the creditors. This is because you always have the option to file for bankruptcy and then the creditors will get little or nothing. The creditors know this and they are usually ready to make a reasonable deal with the counseling agency.  

Ask your credit counselor about how often your payments will be due for the debt management plan. It is a good idea to set these payments up to make a payment on each payday. This way, part of each paycheck will go toward your monthly payment. You could set up an automatic bank payment for each of your paydays. 

Begin Payments

Make sure that you and your credit counselor are on the same page about when your Hawaii DMP payments are due. For that matter, if you are unclear about anything, discuss it with your counselor. The creditors for the debts that you include in your Hawaii DMP will close your accounts. This will have a negative impact on your credit score because your available credit will decrease. As the balances go down on the debts included in your Hawaii DMP, your credit score will increase. The credit card companies may put a note on your credit report that says you are in a DMP. This will have little effect on your credit score.

How to Stay Current With Your Hawaii Debt Management Plan 

Make sure to let your credit counselor know if there are any changes in your monthly expenses or income.  It is important that the counselor know that if you have an emergency need for money that may affect your ability to make your Hawaii debt management plan payments. Either of these issues could lead to your counselor renegotiating with your creditors.

It is a good idea to track your expenses while you are in a Hawaii DMP. Tracking spending is necessary to keep you on budget. Mint is a good online tool to help you stay on budget. You will get monthly reports from your credit counseling agency about your Hawaii DMP. Pay close attention to these reports. 

Talk to your counselor about not only your ultimate goal but also the milestones to set while moving toward your goal. It’s important to reward yourself when you reach a milestone. To emphasize how important this is, consider if you aren’t a runner, you’re overweight, and you decide you are going to run ten miles today. The odds are that you're not going to make it. Your chances of making that ten-mile run increases if you walk for two minutes after every ten minutes of running. The same idea works with paying off your debt. You need to reward yourself after reaching every milestone. Let's say that you have a $10,000.00 debt that you are paying off. You could set your milestones at $1,000.00 increments. With each $1,000.00 decrease in your total balance, you could treat yourself to dinner at your favorite restaurant or a movie. This reward for reaching your debt milestones will have the same effect as the walks in the ten-mile run story. These rewards will increase your chance of succeeding with your Hawaii debt management plan. Of course, you don't want to spend too much  for this reward and you don't want it to cause you to miss a payment or reduce your emergency funds by much.