If your credit counselor closes …

It could be a credit-crunching nightmare. Making payment after payment to a credit counseling agency and then being informed that the people you have worked with to arrange your debt plan no longer exists. What happens to your scheduled monthly payments? What happens to your debt management plan? What happens to the deals with your creditors? What should you do?

Once you find out that your agency is shutting down, steps that you need to take include: letting the creditors know the agency has shut down; trying to work out a new payment arrangement, asking for a reduction of interest rate; check for missed payments on your credit report; stop any automatic bank withdrawals to the counseling agency; and pay bills straight to the creditors. You should act quickly to keep your credit report from getting dinged with late payments or other bad marks.

How an agency might notify you of its closing would depend on the circumstances. It’s possible that the agency will send you a notice telling you that your debt management plan has been transferred to another company. The letter may also give you additional instructions on actions that you need to take to keep things on course. If the agency is being shut down due to government action, a third party might notify you.

Keep these things in mind. While we hope this never happens to you, this knowledge can limit the damage and avoid turning a tough situation into a disastrous one.