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An Overview of Consumer Credit Counseling
If you are considering the possibility of doing debt consolidation or consumer credit counseling, then do it under the federal system so that it is supervised by a federal judge and an independent, impartial, bonded, case trustee. Further, consumer credit counseling outside of the bankruptcy court requires repayment at 100%. Consumer credit counseling through the bankruptcy court does not require repayment at 100% plus interest. Consumer credit counseling outside the federal system requires interest. Consumer credit counseling through the federal system normally does not require interest. Further, Consumer credit counseling outside of the federal system does not always stop late fees or harassing telephone calls. Consumer credit counseling through the federal systems always stops late fees and always stops harassing telephone calls. Get real debt relief with the protection of the federal bankruptcy court .
I have had numerous clients go to consumer credit counseling services only to find out that:
1. The monthly payment is too high
2. The credit card companies refused lower interest rates
3. The credit card companies continued to charge late payments and over the limit fees
4. Their payments were not timely paid to creditors; therefore, additional charges applied to the account.
5. The payments were not accounted for properly and distributed to creditors. (ie: defrauded their clients)Furthermore, even legitimate consumer credit counseling services are paid for and funded by "kick backs" from the credit card companies. The bottom line is that consumer credit counseling does not work, and they have a "conflict of interest" by accepting a fee from you and also the credit card companies.
Dangers of Debt Counseling
Be skeptical of debt counseling and debt management programs. Unfortunately, there are many people out there willing to take your money and not tell you the truth. Additionally, don't send money to the programs that are located out of your state or out of the area. At least if the program is in your state or area, you may have some recourse against them. It is actually best to deal with someone that is relatively local for any possible future recourse. Possible recourse would be through the courts and the appropriate Attorney General's office.
Approach consolidation loans with skepticism
While it may sound like a good idea at the time to consolidate many loans into one loan with a lower interest rate, you still are repaying the loan. You are starting down that road of borrowing and then re-borrowing and then re-borrowing again. Therefore, you must ask yourself the question of, "when will the borrowing stop?" Most of the time, it only postpones the inevitable. Many times just lowering the interest rate does not present enough savings to make your present debts manageable. However, should you still decide to proceed with the loan, review the terms of principle amount, term, and interest rate, very carefully. You also want to determine whether or not a "balloon" payment is required at some point. Should the loan require balloon payment, for most debtors, this is just another invitation to borrow once again. Hence, all of their payment prior to the balloon payment were for no if they cannot get new financing. Therefore, had they filed a bankruptcy, for example at that point, they would have saved the thousands of dollars they paid prior to the balloon payment.
Home Equity Loans put Your House in Jeopardy
Should you decide to take out a home equity loan against your house, you are essentially taking the cash that you built up in your house and giving to your creditors. (Once the equity or "cash" is gone-its gone.)Therefore, should you have any difficulty making your home equity payments, the bank is going to foreclose on your home and will no longer have it available for your use and the use of your family.
Make Sure the Program Deals with All Your Bills
Consumer credit counseling confines themselves to dealing with unsecured creditors (and sometimes not all of them) excluding other obligations such as mortgage arrears, taxes, or late vehicle payments. In effect, they ignore the debts that won't go away while channeling your money to creditors whose claim could have been discharged (or forgiven) in bankruptcy. Is this in your best interest?
True Consumer Credit Counseling
There are literally thousands of consumer credit counselors. The easy way to tell the legitimate ones from the others are their fees. The true consumer credit counseling services are free. They rely on the kickbacks from the credit card companies to run their establishment.
Consumer Credit Counseling Fraud
The Federal Trade Commission has shut down thousands of consumer credit counseling services because of fraud. Further, the FTC, IRS and Congress are investigating consumer credit counseling because they are not true non-profit organizations. These organizations organize themselves as non-profit; however, they operate as a "for profit" operation. When they get caught and are shut down, they simply establish a new non-profit corporation with a new name and go back into business normally in a different state. It would be wise to be very careful if you decide to deal with any of these organization.
Conclusion
Consumer credit counseling rarely works, and you could spend thousands of dollars before you realize this. Only deal with local truly non-profit organizations. And, before you spend thousands and thousands of dollars over the term or there plan, make sure that this offers you the relief that you need when you need it, and that they guarantee this service and results.
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