If money feels tight
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Lots of people go through times when money is tight. It happens after a job change, an illness, a breakup, a big repair, or just rising prices. It isn't a personal failing, and there are people in the United States whose job is to help, often for free.
Three kinds of help
These three sound alike, but they do different jobs.
Non-profit credit counselor
- Looks at your whole budget with you and talks through the options.
- A first conversation is usually free.
- Can set up a debt management plan: you make one monthly payment to the agency, and it pays your creditors. You repay the full amount you owe, but creditors often agree to lower the interest or fees.
- Many non-profit agencies are members of the National Foundation for Credit Counseling (NFCC), whose counselors are certified. Rules for credit counselors are different in each state.
Financial advisor or planner
- Helps with longer-term goals: saving, investing, retirement, and insurance.
- Some charge a fee. Others are paid a commission on the products they sell, like investments or insurance.
- In most places, anyone can call themselves a "financial advisor" or "financial planner". A CERTIFIED FINANCIAL PLANNER™ (CFP®) professional has passed an exam and agreed to standards set by the CFP Board, which lets you look them up.
- Most advisors don't handle debt problems directly.
Bankruptcy lawyer
- Bankruptcy in the United States goes through a federal court. The two kinds most people hear about are Chapter 7, which clears many debts, and Chapter 13, a plan to pay back part of what you owe over three to five years. Both affect your credit report for several years.
- Before you file, the law says you must take a credit counseling session from an agency approved by the U.S. Trustee Program, which lists them by state.
- Many bankruptcy lawyers offer a free first meeting. If money is very tight, a legal aid office may help for free.
- A lawyer can also explain options that aren't a bankruptcy.
Questions people often ask
Whoever you talk to, these questions can help you understand what's being offered:
- Are you a non-profit, a lawyer, or a private company?
- Who licenses or certifies you?
- What will this cost in total, and when would I pay?
- What are all my options, including ones you don't offer?
- How would this affect my credit report, and for how long?
- Can I have the plan and the costs in writing before I sign?
- Will you contact my creditors, or do I?
Warning signs
The Federal Trade Commission and the Consumer Financial Protection Bureau warn that some companies make misleading promises about debt. Signs to watch for:
- Fees up front, before any of your debts are settled. In most cases, a debt settlement company isn't allowed to charge you until it has settled at least one of your debts and you've made a payment on it.
- Promises to wipe out debt fast, or to fix your credit report for a fee.
- A company that calls itself a "debt relief" or "government" program but won't say who licenses it.
- Being told to stop paying your creditors and pay the company instead.
- Pressure to sign today, or no clear answers in writing.
Where to learn more
- Consumer Financial Protection Bureau — the U.S. government's plain-language guides on debt, credit cards, credit reports, and debt collection.
- Credit counseling or debt settlement? — the same agency explains how they differ.
- How to get out of debt — the Federal Trade Commission's guide, with the warning signs of debt relief scams.
- NFCC agency finder — find a non-profit credit counseling agency near you.
- 211 — a free, confidential line (dial 2-1-1) that connects people to local help with food, housing, bills, and other needs.
About this page
Proof Panda is a budgeting and records app. We are not financial advisors, and nothing here is financial, legal, or tax advice. If something on this page is out of date, please tell us at [email protected].