If you’re struggling under debt, things may feel pretty hopeless. But it’s important to remember that there are options available for those dealing with substantial debt, and that having financial issues isn’t a failure, especially now as we face an unprecedented economic crisis. 

Credit counseling and bankruptcy are both useful tools for those who are dealing with outstanding debt, and each has its benefits. If you decide to seek credit counseling, you will want to avoid scams, which are common in the credit counseling industry. 

On the other hand, if you think bankruptcy might be the right option, you may want to seek the assistance of a Brownsville bankruptcy lawyer to ensure you get the most out of the process.

What Is Credit Counseling?

Credit counseling is an option for those with significant debt who want to pay off their obligations without filing for bankruptcy. It involves working with a credit counselor to pay off your unsecured debts using a debt management plan. Individuals receiving credit counseling will also obtain money management advice.

With a debt management plan, you will usually make one monthly payment to the agency providing you counseling, and they will divide it up to pay your creditors directly. This process will ideally make it easier and simpler for you to pay off your debts. The counseling agency may also be able to negotiate lower rates from your creditors.

Depending on the service provider you are working with, you may need to pay one up-front fee, repeated monthly charges, or some other cost. There is also the potential that you may NOT have to pay an upfront fee.  

It’s worth noting that credit counseling may be reflected on your credit report. It may be attached as a comment by your creditor, but it won’t directly impact your credit score.

Avoiding Credit Counseling Scams

Unfortunately, there are fraud credit counseling agencies that prey on individuals overwhelmed by debt by offering a clean slate and lower payments, only to never deliver results. Oftentimes, these “counselors” leave debtors with fewer resources and more delinquent debts.

There are ways to avoid scams, however. 

First, always be wary of promises that sound too good to be true. Anything that sounds too easy probably isn’t reputable. Speaking of which, always deal with reputable agencies. You can check with the Better Business Bureau for complaints and how any complaints were handled. One sign of a reputable agency is that it functions as a non-profit. There are some for-profit agencies that are reliable, but the process of checking is more difficult.

Furthermore, any counseling agency you choose should provide counseling and education, as well as payment services and consolidation. The details of these services should be laid out in detail in your agreement. Make sure to read the agreement carefully to verify that all of the relevant details are included. This includes how long the services will take before you achieve the desired results, the total cost, any offered guarantees, and the address and business name of the agency.

In general, you will want to avoid any agencies that charge exorbitant fees that will only contribute to your debt load. To verify that that debt load is decreasing once the services have begun, be sure to verify payments with your creditors.

Credit Counseling and Bankruptcy

Credit counseling is usually required before a bankruptcy proceeding and if your debts are to be discharged by a judge. This sometimes allows individuals to avoid the bankruptcy process entirely.

However, sometimes the terms offered through credit counseling simply aren’t enough to meet your needs. For instance, credit counseling doesn’t offer an “automatic stay” in the way bankruptcy does, meaning it won’t delay foreclosures, repossessions, or utility payments.

Law Offices of Phillippe & Associates Proudly Assists Brownsville Bankruptcy Filers

Bankruptcy and credit counseling both have their risks, but they can both also offer significant relief for those struggling with debt. 

Bankruptcy is an option for those seeking to discharge their debt while keeping their property, and credit counseling is an option for those not ready for the reduced credit score a bankruptcy filing represents.

In either case, the Brownsville bankruptcy lawyers at the Law Offices of Phillippe and Associates can help you learn about your options. Together, we can work to make your financial future a success.

 

If you’re interested in learning about whether filing for bankruptcy protection might be right for you, contact the Law Offices of Phillippe and Associates today at (956) 544-6096 to find out more.

 

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