Is credit counseling considered to be bankruptcy?
Credit counseling and debt consolidation is not bankruptcy. It is considered aneffective alternative to bankruptcy.
Are Debt Consolidation programs similar to Chapter 13 bankruptcy?
Debt Consolidation programs are similar to Chapter 13 bankruptcy only in that they are repayment plans. When a consumer files bankruptcy, creditors are often forced to discharge debt and the consumer is no longer held legally liable for the debt. If a client files chapter 13, the creditors are forced to accept the fact that the debtor can repay un-secured debt at a fraction of the dollar amount owed.
What is our debt consolidation program?
Our debt consolidation program is a repayment plan that is mutually agreed upon by the creditors and the consumers. As opposed to reducing the amount of debt that is owed by the consumer, the creditors make adjustments in interest rates and penalty fees that enable the consumer to repay the debt at an accelerated pace. The program enables the creditor to recoup all of the funds that were loaned to the debtor. Counseling programs are not forced upon the creditor, like bankruptcy, and the client still maintains legal liability for repayment of the debt, which limits the effect that it will have on the consumer’s credit
How will enrollment in a credit counseling program affect my credit?
Most creditors view credit counseling and debt consolidation as an acceptable alternative to reducing the burden of debt. Credit counseling exists to assist creditors in collecting debts and assisting debtors in preserving credit. It only works if the creditors cooperate, which most of them do. The creditors reserve the right to report to the credit bureau that the debtor is enrolled in a credit counseling program and in rare cases, creditors may report that you are late on payment obligations.
When researching a credit counseling organization that offers debt consolidation, what should I look for?
When researching a credit counseling organization that offers debt consolidation, you should look for a nonprofit organization that carries 501 (c) (3) status. Most nonprofit counseling agencies do not charge fees, but do solicit voluntary contributions to offset their administrative costs and the costs incurred when negotiating with creditors and establishing an account for a debtor.
Some for-profit organizations do perform counseling services, but they usually charge large fees and are unable to negotiate repayment benefits that are as favorable as those arranged by nonprofit agencies.
Can I still use my credit cards when I am on a debt consolidation program?
As part of the contractual agreement between the creditors and the client, the client is required to stop using the charge cards. Acquiring more debt while trying to get out of debt defeats the purpose of the program. If the creditors are willing to give more favorable repayment benefits, they want to make sure that the client will not incur more debt.
The creditors close the accounts and sometimes request that the debtor destroy the card or return it to the creditor. Reinstatement of charging privileges is done at the creditor’s discretion.
Do you charge a fee?
Yes, however this fee is structured into your monthly payment program and is far below the amount of money we save you in reduced interest charges, late fees, and total monthly expenditures.