Bankruptcy Alternatives: Credit Counseling
If you don’t think bankruptcy is the best choice for your finances, you have other alternatives available to you, like:
Credit counseling is also one of the choices you have to potentially eliminate your debt without filing for bankruptcy.
Below is some credit counseling information, but also be sure to connect with one of our sponsoring bankruptcy lawyers, who can talk to you more about your debt-relief options:
What is Credit Counseling?
As you may know, everyone who files for bankruptcy must complete a credit counseling briefing – in this context, credit counseling involves getting input from an accredited debt management agency about your financial options.
In the context of credit counseling as an alternative to bankruptcy, credit counseling involves getting low-cost or free help from credit counseling professionals who can guide you to healthier financial practices.
Choosing a Credit Counseling Agency
Like debt settlement firms, not all credit counseling agencies are looking out for your best interest.
In fact, even some “non-profit” agencies are untrustworthy when it comes to putting your financial concerns before theirs.
For this reason, the National Foundation for Credit Counseling (NFCC) offers helpful qualities to look for when selecting an agency. Make sure your credit counseling agency is up to par:
Does the Credit Counseling Agency Have:
- An Affiliation with a National Organization? Organizations like the NFCC require affiliates to adhere to strict ethical standards, which you can research on the Internet. If a company doesn’t advertise its affiliation, ask.
- A Variety of Services? Legitimate credit counseling agencies should offer a variety of services such as budget counseling, debt counseling, housing or rental counseling, pre-bankruptcy services and community education classes. Companies that offer only one or two services may not have the resources to address your needs in the most efficient way.
- Reasonable Fees? In general, fees are considered “reasonable” if they amount to $50 or less for start-up costs and $25 or less for monthly services. If you’re truly unable to afford such fees, legitimate credit counselors should be willing to waive them.
- A Certified Consumer Credit Counselor? Getting certification from the NFCC means that a counselor has passed rigorous tests and been trained in various credit counseling skills. You want to make sure anyone you work with has this professional background.
- Insurance for Your Deposits? Make sure to ask any company you work with for written evidence that your money will be insured against fraud or financial troubles the company itself may encounter.
- Payment Distribution to Creditors? The dollars you give the agency should go straight to your creditors. Ask how payments are distributed.
- Independent Accreditation? Make sure an appropriate third party like the Council of Accreditation (COA) has accredited the firm you choose. This way, you’ll know that certain protections are in place to protect you and your money.
The Pros and Cons of Credit Counseling
Working with a credit counseling agency can be a bit like following a Chapter 13 bankruptcy repayment plan – some agencies can stop creditor calls and get you the guidance you need to eliminate your debt.
The downside, though, is that the protections of bankruptcy won’t be in place under a non-bankruptcy counseling plan.
If you miss a payment, for example, you may lose the benefit of the negotiated debt payment and have to pay the entirety of your original debts.
A Bankruptcy Lawyer Can Help You Decide
For more details about credit counseling and bankruptcy, you can talk with a bankruptcy lawyer practicing near you.
All you have to do is fill out our free online case evaluation form or call 866-288-7281 and we’ll connect you with a sponsoring bankruptcy attorney practicing in your area.
Why wait any longer to take control of your finances? Get started today!