The Truth about Credit Counselors and Debt Negotiators

  1. The primary source of income for credit counselors comes from your settlement. They are not necessarily negotiating in your best interest. The more you agree to pay the more your credit counselor earns.
  2. Credit counselors cannot stop judgments or wage garnishment.
  3. Your credit is not protected. The debt reduction is reported to the credit bureaus. Think about why you were avoiding bankruptcy.
  4. You are continuing to accrue late charges and other fees even though you settled on the debt. These late payments are reported to the Credit Bureaus. Think about why you wanted to avoid bankruptcy. You probably thought it would be better on your credit if you settled with a credit counselor.
  5. Not all your creditors will be willing to settle on their debt.
  6. You will receive 1099s’ from all creditors you settled with. You will have to pay additional taxes to the IRS on the amounts you saved. This is not the case in a bankruptcy.
  7. Some credit counselors will try and convince you to take money from your pension or take a 2nd mortgage on your home to pay credit card debt. Why would the counselor ask you to do this? The answer is simple. Their loyalty is to the creditors not to you.
  8. The more money you pay to creditors the more the counselor earns. In a bankruptcy your pension and equity in your home is protected. You can eliminate your credit card debt without losing your pension or taking a 2nd mortgage.
  9. Some credit counselors have been declared completely fraudulent. Be careful of agencies that are not Non-Profit.
  10. The administrative costs for credit counselors can be between $3,000 -$10,000. A bankruptcy fee is usually less than $1,000.
  11. If you need to file bankruptcy because of credit card debt, personal loans, wage garnishments, judgments, medical bills credit counseling is not the way to go. Credit counselors prey on people’s anxiety regarding bankruptcy.
  12. Seek the advice of a competent attorney before signing a contract for credit counseling.
  13. The United States Bankruptcy Code is there to help people in times of trouble. Not to judge or to make people feel bad about themselves.

Take the next step! Get a free initial consultation and find out if bankruptcy is a better alternative for your situation.