Debt and Credit Counseling

DEBT CONSOLIDATION: WHAT IS IT?

Debt consolidation with debt counselors is where you take the debts that you owe for credit card debt and other liabilities and let one company distribute your one payment to all of your creditors. The debt reduction process takes years to complete. Note, however, that you will only get closure on debt consolidation if you make all of your payments, and if the company really does give the money to your creditors.

DOES IT BRING CERTAIN CLOSURE?

Can you repair debts this way? Just because you sign a contractual commitment for debt consolidation does not mean that your money troubles are behind you. In fact, I hear client after client tell me that they tried credit counselling or debt consolidation, but got so frustrated they had to stop it.

So, if you start a debt consolidation plan hoping to finally end the frustrating chapter of your life, chances are you will only drag it on for months and years. If you are really wanting certain closure, consider a Chapter 13 bankruptcy .

DANGERS AND FRUSTRATIONS OF CREDIT COUNSELING

Well, then. What can be so aggravating about debt counseling? For starters, these companies are not on your side. They are in business to make a profit, which is all fine and good. However, unlike an attorney, there is no duty to advise you to do what is in your best interests. A bankruptcy lawyer must represent you, the client, and your interests. No such duty exists for a paralegal or credit counselor.

Besides, do not let the perception that a debt counseling company is a "non-profit organization" fool you. There is recent news about these people in trouble because the IRS and Federal Trade Commission (FTC) are investigating and have recently cracked down on these companies who are accused of lying about their true profit structure just to get tax breaks and your trust. The reality is that many debt consolidation companies are funded directly by the credit card companies that you want to get rid of. What kind of advice do you suppose you'll get from them?



Also, I hear from frustrated people coming to me because they paid lots of money into these schemes and never saw their balances go down . After giving them thousands of dollars for months and years, people finally come to me, realizing that the most effective way to wipe the slate clean, getting a fresh start, is using the services of a skilled bankruptcy attorney.

REQUIREMENTS OF DEBT COUNSELING

Even if you wanted to knock your debt down using these companies, you will need to have a regular flow of income that far exceeds the money you spend each month on your bills. It does you no good to give them only $45/month to share with all your creditors. There is an income requirement which many people don't meet. An employee may talk you into signing an agreement even if it eats into your rent money, not because they care about your best interests, but because they may be getting a commission for each dollar they take in.

Again, only an attorney has a duty to give you straight advice about what is in your best interests, not their own.