Pitfalls of Credit Counseling
If you have reached that point where you realize that yes, you do need help with your credit cards, but you want to avoid declaring bankruptcy, most people seek professional credit counseling. The credit counseling business has flourished over the last 15 years, going from a service few had heard of to a major force in the financial world. Some credit counseling businesses have even gone nationwide and are traded on the New York Stock Exchange. But is credit counseling for you? Let’s take a look at what you can expect with credit counseling and what the possible problems are.
When you sign up for credit counseling, what are you doing is essentially getting someone to try to help you pay off your credit cards. During your first meeting, you will sit down with a case worker and you’ll give them all of your credit card numbers, account information and contact numbers. Over the next few days, your case worker will contact all of your credit card companies and offer then a compromise on what you owe. They will try to get you everything from a significantly reduced balance or a lower interest rate and even the elimination of some fees. Why would the credit card companies go along with this? Because most of them realize that if they don’t, the next stop for you is going to be bankruptcy. By going to credit counseling, you’ve made the positive step of admitting that you have a problem and seeking help. The card companies realize that if they don’t meet you half way, they could lose all the money owed to them in bankruptcy court.
But what happens when a credit card company refuses to play ball. It does happen, and when it does, the credit counseling service simply doesn’t have much to offer you. If you’ve found yourself in this situation and you don’t think you are getting your monies worth from the credit counseling company you chose, you have three basic options.
The first choice is to seek the advice of an attorney. By hiring a lawyer, it can be like having a more personal one-on-one credit counselor. You would be surprised how much more flexible a credit card company is when they get a request to reduce your debt from a lawyer than from a credit counselor. This, of course, is a much more expensive option, and let’s be honest, if you had extra money lying around that you could give to a lawyer, most people would just send it onto the credit card company. But there are other options.
You can try another credit counseling service. Just like restaurants and dry cleaners, you are going to get varying degrees of service with each place you go. You might find a credit service that has a good relationship with a particular bank or credit card company and you might get better movement on your accounts that way.
Your final option is really the nuclear option: declaring bankruptcy. The most important thing here is making sure you seek the advice of a lawyer before you sign on the dotted line. You will be sinking your credit for 7 years, but if you feel you don’t have any other options, this one is always available to you.