CC Counseling Service instead of bankrupty?

[Wowzers]

Hi, I have read here and elsewhere the idea that getting a "credit counseling" hit on your credit by working with one of these agencies to pay off your debt is as bad as filing BK. I have not seen proof of this, but I've heard it claimed often along with the idea that these non-profit agencies are somehow partly operated by the credit industry. I do not see it necessarily as evil that the credit card industry would have an interest in an agency like that since they want people to pay back what they owe, but that's really a separate discussion.

I really don't want to file BK and would much rather negotiate lower rates and get into a payment plan. Besides my own personal conviction to pay off as much of my debts as I can, I also don't want my future job prospects sabotaged by the BK on my credit report for the next 7-10 years. At present we have not missed any payments but due to some unexpected medical bills, we anticipate the time is coming when it will not make any sense to continue paying minimum payments to the creditors at the existing 10-14% interest rates.

Can anyone provide evidence and information that in fact we would be better off filing a Chapter 7 (which we qualify for) than to use CCCS to negotiate a payment plan that we can handle? I'm finding this question difficult to answer because a lot of the people against using CCCS on the Internet seem to be profiting from the BK industry, and then my other concern is that if I call CCCS and ask them the truth that they might be the "bad guys" in sheep's clothing.

So I guess I'm saying it would be really nice to hear some first hand accounts from folks like me who took the dive. Thanks!

[LadyInTheRed]

There are many members of this board who filed BK after trying debt management programs offered by credit counseling companies and wish they had just filed BK in the first place. Not sure how many of those are currently active members. Try a forum search if you don't get any first hand accounts.

I think you'll find this article interesting: http://getoutofdebt.org/7233/the-tru...and-bankruptcy

[lillymarlene]

For what it's worth Bank of America, who I once had 5 maxed out cards with at the time, suggested that I call a credit counseling agency with who they were most likely affiliated. I called and I didn't feel all that comfortable, since it seemed they wanted me to pay back more than I could afford anyway.

Then I later, this was in the spring of 2010, decided to try a place that a friend had successfully used. (Her credit card debt was nothing compared to mine, probably a few thousand $$.) At my counseling session, the woman took one look at my credit report, gave me the card of an attorney and suggested bankruptcy.

So, I guess it all depends, on your income, how much debt and if you could actually be set up with a payment plan you could handle. Maybe check out some "credit counseling" places and also take advantage of free consults with a few bankruptcy lawyers.

Well good luck in whatever you decide.

[basketsbears]

Hi,

My husband and I had thought of filing BK a few years ago when the housing market went bad. We had our primary residence and a small, rural house that we were losing money on monthly even though it was rented (Countrywide/BOA mortgage holder - still not foreclosed on, but that is a different story), which was the reason we were going to file. Also, around the same time we were maxed out on credit cards and all the rates jumped up to 30%.

Anyway we contacted a couple of attorneys and at that time, because I was working full-time, we were clearly a Ch 13. We had a lot of unsecured debt, but were not behind on payments, but the main reason was the rental home why we were discussing filing. Anyway, we contacted a CC agency that was with our credit union, and our credit union paid all the fees for this. The actual experience with the CC agency was fine, as we were not paying the fee. However, fast forward to today, and we did find out when we started talking with attorneys last fall about filing Ch 7, and they all said "your credit has already taken a hit, pretty much as if we had filed BK." So, while the credit score is not the most important thing, we did all that without the protection of BK, took the "hit" on credit, and if we would have continued to pay and not file, it makes me wonder if our score would have just stayed down?

All that being said, we should have just filed Ch 13 a few years ago, and if at this time since I am not working full-time perhaps we would have switched it to a 7, I don't know, but it sure would have been nice to have had everything done and on the road to our "fresh start". I feel like we have started and stopped for the past few years.

Good luck in whatever you choose to do.

[AngelinaCat]

We tried to settle with one of our CCs for no interest rate and be satisfied with a payment of about $260.00 or so a month until we paid the debt off. The CC company blew us off and insisted on full payment with interest, or nothing. Nothing is what they got.

Also in 2004, 'Hub was found to have a fast growing form of prostate cancer and had a radical prostatectomy in October 2004.

There was some bill that we had been faithfully making monthly payments toward paying off. When we got to about the $1800.00 mark, we received a 'nasty-gram' from the company stating that we had violated the payment agreement, and they were going to go to court. We fired off our own 'nasty-gram' telling them that THEY were the ones violating the payment agreement by even sending us this message, so therefore, 'go pound sand.'

We did not want to file BK either, but you are not going to get anywhere by trying to 'settle' in any way shape or form. You really need to understand that filing BK is NOT a shameful act, but is a tool for those who need relief and are trying to do right by your family.

[LadyInTheRed]

lillymarlene's post reminded me of a point I've read that is worth repeating.

In a debt management program, you pay off your debt according to the terms the credit card companies will accept. You usually still pay interest and not all credit card companies will agree to reduced payments or interest rates. Even fewer will agree to a reduction of the principal debt. Many complete a debt management program only to discover they still have debt to pay.

A Chap 13, puts the debtor in control. You pay back only what you can afford. The credit card companies have no choice but to go along unless they have a legal reason to dispute a discharge which they don't in the majority of cases. All interest on unsecured debt stops and all dischargeable debts are gone when you finish your plan.

[Wowzers]

Thanks for the feedback so far. This is what I need to hear. Obviously a major variable is how the creditor behaves and what they accept. I am also concerned that even if I end up paying off a negotiated plan, how long will it be until the creditors "forgive" me (e.g. how long does the major "credit counseling" ding stay on one's report?).

More feedback welcome!

[AngelinaCat]

Sorry to be hardnosed, but I guess you did NOT get the message. Your credit WILL be dinged, and also damned near 'snatched' and put into a net and thrown into the river!

Credit Counseling services do NOT be your friend; instead they are a financial vampire and will suck you dry to the point that you have no choice but to give up and file bankruptcy. This will be AFTER you have sacrificed all of your retirement accounts and any other accounts you may have that would be exempt in a BK.

I am certainly not asking you to file BK if you don't wish to. However, any retirement accounts you may have now are exempt. They won't be if you cash them out when trying to satisfy the financial vampires, only to find that you have satisfied little or no part of that debt, and you are being hounded.

Just some thoughts...

[frogger]

But Credit Counseling makes people feel good inside........

Seriously, if you qualify for a Chapter 7, you're foolish to play the cc game.

[basketsbears]

Just wanted to restate what we all have said, since your question was about credit score too. Your score will take a hit like pretty much the same as if you file, without all the benefits. Believe me, I think we all have struggled with filing or not, but as I have taken the path you are talking about, I wish I would have just filed from the get-go.

Also, remember you have no protection from the lenders during the debt management plan. If something would happen and you could not pay, things go back as they were before and with the fees, etc could off-set any savings that you made. Also, with the debt management plan all accounts are essentially closed, and one is not allowed to obtain additional credit during the plan. Although we were able to get a vehicle during ours. But everything else is frozen.

Best of luck in whatever you decide.

[katztoo]

We went to a CCC before filing BK. The best they could do for us was 1700/mo payment for 5 years. Our payment with chapter 13 was 874/mo for 5 years. They are probably a help if you have a small amount of debt and are behind some. They suggested bk to us! Thee is no obligation to consult with them. Just make sure they are a non-profit agency.

[df04527]

To clarify the credit hit....you will be hit and hit just as hard as filing BK. You will have those dings on each CC account for seven years or possibly longer.

[kornellred]

Credit Counseling is mandatory before filing for bankruptcy. It is exactly the same procedure when the counseling agency knows that you are going to file for bankruptcy, so you might as well see what they have to offer. If you do not like the numbers they come up with, you can simply refuse the offer. And, you have completed a bottom-line requirement in the BK filing procedure.

You won't like what they offer, unless you earn a significant income. And if you have not been paying your creditors, your credit is trashed no matter what you do. Bankruptcy trumps debt settlement in 99.999% of cases.

[keepsmiling]

I'd be willing to bet that some HUGE percentage of folks on this board have tried this route. Paid all that money and... look where they are.
Save your hard earned cash and listen to those who have BTDT.
Get your legal bailout and move on with your life. Stick around here and help counsel the next person in your shoes who asks the question- and they are LEGION.
Good luck and if I haven't already welcomed you , I will do it now. Welcome!

[ksgirl38]

I talked with one prior to filing. I read an article about finance that indicated if you were in this deep you should seek out a cc agency so I clicked on the link and sent my info to them, had a phone interview with one of their representatives about a week later. This is basically what convinced me to try BK. They wanted me to pay back more than I could afford and I just didn't have anywhere else to make the budget cuts. I had been threatening my cc companies with BK, but never took it seriously until after that conversation. Basically they wanted me to make large payments over a 4-5 year period. I easily qualified for a Chapter 7 so I chose that route instead. Most of the cc agencies may negotiate to lower your debt for you, but they also tack on their fees. In the long run the fees to the BK attorney are less and if you qualify for a Ch 7 then you could have your debt wiped out right away. I have to agree with the rest of the people here, stay away from the cc agencies. CC agencies = evil.