Interesting development: The federal government legislation that requires Americans to undergo credit counseling (debt management) prior to filing bankruptcy, may actually be creating more hardships and debt.
The IRS conducted a lengthy investigation into non-profit credit counseling agencies, and which resulted in the revocation of the non-profit status of of 41 agencies. And more are expected to follow.
The problem? Many of the debt management plans sold to consumers were not affordable, which resulted in greater debt.
Although credit counseling can indeed help consumers with their debt, Americans must take precautions and deal only with reputable agencies. Consumers should first ask what services the agency offers, how much it will cost, and how their counselors are certified and who certified them.
A reputable and reliable credit counseling agency will provide you with much more than a re-payment plan. They will provide you with classes on how to manage your current debt and prevent reoccurrences.
Another solution; which should only be considered by consumers with exceptional large debt or those who know they cannot repay the full debt they owe, is debt settlement. In a debt settlement program, the counselor negotiates the total owed to a lesser amount, then structures a repayment plan for that lesser amount. This 'charge-off' action often results in damaging credit, but if your credit is already severely damaged and you cannot repay the full balances due, it may be a better choice than credit counseling. Why? Because if you fail in the credit counseling plan, what recourse is left for you? Debt settlement or bankruptcy, which again severely damages your credit.
Consumers must make a wise decision from the beginning, and whichever plan they choose they should stick with to fruition.
Whichever plan a consumer chooses, find out all the facts upfront, including certifications, references, as well as total fees.
For free credit counseling consultation, or to obtain free bankruptcy forms, visit Credit Federal.
