In D-E-B-T? Lutheran Social Services has some tips to get out

Don Ness’ efforts to help out Northlanders in tough financial situations haven’t gone unnoticed. Lutheran Social Services’ financial counseling division recently honored Duluth’s mayor with its Financial Advocacy Award.

Ness was recognized for helping to prevent foreclosures in the area. He has been working with the city and county to identify homes under threat. When a notice of pendency — a document stating there is a pending lawsuit concerning the title of a piece of real estate — is filed, a letter is sent out from Ness’ office letting the title-holders know about access to free foreclosure prevention counseling through LSS.

“Our strategy was simple; the best way to address the foreclosure issue is to prevent foreclosures from happening in the first place,” Ness said. “Our working group came up with a number of innovative strategies to help Duluthians keep their homes.

“Thanks to the strong partnership with LSS, many families in Duluth still have their homes.”

Ness also helped to establish the Duluth Foreclosure Task Force, which encourages cooperation and collaboration between Duluth, St. Louis County, non-profit agencies and for-profit banks.

This teamwork has been a resource for homeowners to inform and refer them to counseling and community events.

Of course, foreclosures don’t just happen overnight.

The slow-to-rebound economy, coupled with finally stabilizing unemployment rates, has led many to stress out about debt, aka one of the most unpopular words in the English language.

With that in mind, the Budgeteer turned to Marjorie Klimek, a counselor supervisor at LSS, to answer some of the most common questions about money matters that can have significant impacts on lives and homes:

Budgeteer: What sort of services does LLS provide, and what sorts of fees are charged for those services?

Klimek: LSS offers budget, debt and housing counseling at no charge for sessions. There is a small fee if, after you meet with a budget counselor, you opt to enter our debt management program — the fee is based on the payment to creditors and will be discussed in detail with your budget counselor. Bankruptcy counseling does generally have a fee for service of $75, which is comparable to any other agency offering bankruptcy counseling. The fee can be waived in certain circumstances, which can be discussed when a client calls for an appointment.

Say I’m in debt up to my eyeballs, where should I even start — how do I prioritize?

All individual circumstances are unique, so this is a difficult question to answer in a few short sentences, and is best answered during a free appointment with a budget counselor. In most instances, you will want to pay your housing expenses (rent or mortgage and utilities) and other secured debts (such as car payment) first. Student loans are important as, if you become delinquent, you may face wage garnishment, which is the same for delinquent taxes and child support. Unless you are facing legal actions which may lead to wage garnishment or bank account levy, there is not necessarily a specific order to the priority order of payment on remaining unsecured debts.

What sorts of recommendations or qualifications should one look for from a debt management program?

Your best bet is to look for an agency (such as LSS) that is certified through the National Foundation of Credit Counseling at www.nfcc.org.

If someone is getting 10 to 12 calls a day from multiple outside collection agencies (OCAs), what can he or she do to get them to stop calling, and does LSS work with OCAs?

It depends upon the situation. Again, you’d want to discuss your circumstances with a counselor to determine best options for addressing debts, as the situation may be that you are better working with creditors than avoiding their calls and making your situation more difficult.

If someone’s debt hasn’t been written off yet, does LSS have any agreements with the different credit card companies to get rates/balances lowered?

Sometimes with a smaller creditor, a phone call made together with the client can make a difference. The larger national companies are still worth a call, but they may not have as positive of a result — they may just clarify the date set for “charge off” and how much is needed to be paid to stop further legal action. Through our debt management program (DMP), we can get concessions for clients with multiple creditors that set the interest rate lower than a client may be paying on his or her own. The self-payment method may get a lower rate or payment, but it is usually temporary and only under certain hardships determined by the individual creditor.

Does going through a debt management program affect someone’s credit score?

Credit scores are not directly affected by entering a DMP. However, there can be an indirect effect: If a client is current on all debts upon entering a program, our counselors coach clients to stay current right up until the first payment is made through the program to avoid late fees and a negative hit to their credit score. If a client is already behind on payments, entering a program can improve their credit due to re-age policies and getting back on track with regular payments.

What sorts of information are needed when someone comes in for a debt management consultation?

A counselor will be going through a budget to get a snapshot of your finances, so bringing in a list of your monthly expenses is helpful. Also try to bring the most recent correspondence from your creditors and, if you can, your credit report.

Say someone is nervous to talk to his or her debt collectors about their situation — does LSS take over communications with them? Or, what are some tips that you have to deal with debt collectors?

It helps to know your rights with third-party collection agencies (Fair Debt Collection Practices Act).

You can find this information at our website, www.lssmn.org/debt, or at the Federal Trade Commission’s www.ftc.gov website.

If you feel your rights are violated, you may opt to talk to an attorney from National Association of Consumer Advocates at www.naca.net.

Does LSS assist in any way with foreclosure of houses?

We are a HUD-certified housing counseling agency and offer housing counseling as one of our services. If housing issues are a concern, people can call to talk with one of our housing counselors at (888) 577-2227 between 8 a.m. and 4 p.m. Monday through Friday.

Once starting a program with LSS, how long can one realistically expect to be in a program with debts totaling more than $25,000?

With a larger amount of debt, the payment to creditors will be larger. Our DMP terms are up to 60 months, with an average of about 48 to 52 months.