Credit Counseling

Posted by Kevin on September 21, 2009 under Bankruptcy Blog | Be the First to Comment

Credit counseling is an alternative to bankruptcy which can work for some people. A good credit counselor can teach you how to manage your money, help you establish a workable budget, and negotiate debt management plans with your creditors to reduce interest rates and spread out payments on your credit cards.

My experience has been that credit counseling works best for consumers who have relatively few credit cards, who do not have significant debt in relation to their income, and who can pay off the modified debt in 2-3 years.  Repayment through a credit counselor is voluntary.  So, each creditor has to agree to the proposal. If one or two do not agree, then effectively the consumer does not have a deal ( no reason to pay off 5 or 6 creditors when the other creditors get judgments against you and levy against your bank account or garnish your wages).   Balking creditors,  lots of creditors, substantial five figure debt- bankruptcy is probably the better option.

Well, how do you get information about credit counseling or find a reputable credit counselor?

• Check FTC website
• Make sure counselor is affiliated with National Foundation for Credit Counseling or accredited with Better Business Bureau
• Ask for a referral from local Legal Aid
• Watch for high up front fees.

Credit counseling will impact on your credit score but less than bankruptcy.

For further information, please refer to the following videos

Introduction to Bankruptcy

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