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Can Credit Counseling Help Me?Over the past few years, credit counseling has become a popular solution for individuals who are considering bankruptcy.
This is largely in part, because the federal guidelines for filing bankruptcy have to tighten and there are more credit counseling services available to help consumers manage their debts as well as aggressive collection agencies. When searching for a reputable credit counseling agencies, we strongly recommend Consumer Credit Counseling Services (CCCS), which are a network of nonprofit counseling agencies, which offer advice, budgeting, debt-management plans, and housing counseling. To ensure that you are dealing with a member of the Consumers Credit Counseling Services, ensure that you look for their accreditation by the Council on Accreditations. There are other credit counseling organizations and some can and do legally collect a small fee for administrative costs, however, they cannot profit from collection fees or interest charges. Usually when an individual cannot meet their financial obligations by income alone, they may consider bankruptcy. This usually occurs when the person have fallen so behind on their debts, that creditors have started collection proceedings or other legal action, such as foreclosure, or repossession. However, when a person declares bankruptcy this stays on their credit report for 7 to 10 years. The individual must hire a lawyer who specializes in bankruptcy, who is entitled to a fee for their legal advice. Then a Federal judge will assess the debtor's ability to repay their debts and may require that a trustee hold a substantial portion of that individuals monthly income. A non-profit credit counseling service, however, may provide a better option. Once the credit counselor has gone over all pertinent documentation, they usually tally up all outstanding balances, monthly payments, and other obligations such as child support. Then the counselor will calculate a single payment to the credit counseling service, which is used to pay the creditors. Often the credit counselor will work as a liaison between the credit card companies and their customer to negotiate lower repayment terms. However, using a credit counseling service can have some negative consequences, such as the surrendering of your credit cards in exchange for lenient repayment terms. In some instances, the use of a credit counseling service has had as much of a damaging effect to the consumer's credit score as if the consumer had filled Chapter 13 bankruptcy. Lastly, there are several unscrupulous agencies that masquerade as a nonprofit enterprise, but who actually collect your payments for their own
use making your situation worse than what it was. If you are seeking credit-counseling advice, make sure that you verify the agency's Better Business Bureau file and ask the advisor direct questions during the initial consultation. For more information on Consumers Credit Counseling Service visit them at: cccsstl.org
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