Using credit counseling services

[beachgirl]

Has anyone used a credit counseling service? Before we considered bankruptcy, we talked to someone and she worked out a plan for us. It sounded great, but before we tried it, I was wondering if it was a good idea?

[Minnymouth]

I'm not knocking credit couseling and payment programs, but in my opinion they only serve the purpose of helping you get on a budget.

They CONNOT get all the creditors to work with them, thus part of the creditors will, part of them won't. It is still a black mark on your credit report and is treated pretty much the same as a bankruptcy.

If they cannot get all the creditors to respond and get you on a payment plan with ALL CREDITORS, then what purpose do they really serve???

Besides, many charge a fee upfront before your creditors are paid and often the creditors are paid very little towards the balance you owe them AFTER the credit counseling firm takes out their own fee.

Just my thoughts,

[SinkingFast]

We went the Credit Counselling route before we started to pursue BK.

The DMP plan that was figured for us was not affordable. We were paying $2900/mo in minimums, and the DMP payment was $100/mo higher. Plus there would be fees on top of that. Granted, if we coulda paid it, we woulda been outa debt in 5 years.

The company we picked was one of the DOJ approved Credit Counselors. We were hoping for some break on interest rates, and maybe a reduction in some principal balances. The plan called for full pay back. While some of the interest rates were lower than we paid at the time, others were higher.

DMP's in general, suffer from the same problem Ch 13 plans do. They work if you have a payment plan you can afford, and you get lucky and nothing happens while you're in the plan.

It's a risk. Just so you're aware up front. It's like being in Ch 13, without the rules and protections provided by BK Law.

[Pumpkin729]

IMHO....I'd rather take my chances with the Chapter 13 at least I have the BK law protection.

[LostOne0069]

From my conversations with them, I understand that one of the guidelines that the credit counseling agencies use is that any repayment plan can only be spread over a max of 5 years.

So first thing you do is take your debt, divide it by 60 and look at the result. That result is what your payment would be if ALL of your creditors agree to a 5 year repayment at ZERO interest... and this isn't likely. If you could afford that payment, then going the credit counseling route may be good for you... if you can NOT afford that payment then bk is more likely to be your best option.

[SinkingFast]

We went with CCCS of Atlanta.

After we'd looked at everything all laid out, we didn't see any way out. But we thought maybe a professional eye might know of options we hadn't considered. That's why we approached the Credit Counseling Agency in the first place. We wanted a professional opinion of our situation and suggestions for options.

You know you're in trouble when they give you a DMP that will cost more than you currently pay and cannot already afford.

And there were only 3 recommendations,..............

1. Contact or Mortgage Lender to work out something with them.
2. Contact our Auto Loan Lender to work out something with them.
3. Seek Legal Counsel.

So, it won't hurt to get the opinion, and learn your options. But you've got to know going in that the DMP they set us is workable for you over the long haul. Otherwise, you're delaying the inevitable, and spending more money to prevent doing what you'll ultimately do. File BK.

By the time we'd gotten to the Credit Counselors, we'd already refi'ed, and cashed out retirements, and used up every cent in savings. All that bought us 4 years of time. But here we are. Ended up at the same spot after spending thousands of dollars hoping things would turn around.

[tenchi]

I went with ameridebt two years ago which got bought out by money management inc. I think you're better off filing for BK. Like others have said, they don't work with all your creditors and some like the one I delt with even charged me for their services. I've just started the process of filing and I think it's the best decision I've made.

[Sean Tyrer]

Credit Counseling Organisations

Hi Beachgirl,
Fundamentally credit counseling organisations work for your creditors as the terms of Debt Management Plans are dictated to them by creditors. They do not act in your best interests as such.

Regards

Sean

[13inOR]

One thing I have heard is a lot of these places like Ameridebt and some of the others you see advertised, can really screw you up. I read a magazine article about a couple who used Ameridebt and faithfully sent their payment every month, assuming it was being disbursed to creditors, per their agreement. Evidently after about 90 days, they realized not one cent had gone to their bills, and their credit, which had been great and they had tried to preserve by going this route, was trashed.
The recommendation that seems to be the best is to go with the non-profit types. Like our local CCCS for example, only charges you a few bucks a month, just enough to barely cover postage and envelopes, and they are very reputable. Most of the ones you see on TV should be avoided because you can end up in worse trouble. Just something to think about.....