Credit Counseling as an alternative

Let us start by admitting we are jaded. We are a bankruptcy firm and we file clients into bankruptcy. We do not engage in credit counseling in the same way that "Solutions" or "ABC Credit Counseling" does. We don't really like credit ounnseling agencies, we see them as a bit of a scam and the IRS has been agreeing with us as of late.

Having established thast as our rule, every rule has an exception and in this case it is Northwest Credit Counseling Services. NCCS has been a great resource for some of our clients and when we can't make the bankruptcy work to your benefit, we will typically send you to this firm.

You may have seen Jay S. Jump and Andrea Missiano appear on KCTS together to discuss these hard economic times, bankruptcy, and credit counseling.

So now that you know where we are coming from we present you the following FACTS:

(1) Credit Counseling organizations are sponsored by the credit card companies themselves! Consider this for just a moment. Credit Card companies are here to do one thing, collect your money. When you don't pay, they need to find alternative means. One of the normal things they do and we have always understood as normal is the collection process. Some guy who is snide and rude calls you up and says "You better pay or I'm taking your first born." That person threatens us into behavior and payment.

Now consider the credit counselor guy who says to you "If you only pay $100.00 per month to these guys, and $100.00 per month to these guys, you will have all your debts paid off in under 7 years! Won't that be wonderful? And with all your debts paid off, you will have good credit!" Of course, since you want good credit, this sounds good to you. So you decide to make the credit counseling payment!

Now, dear reader, riddle me this. . . How are the two scenarios any different for the credit card company. Did they not just get money? Do you think they cared how they got it? No! It doesn't matter if they cajole you with credit counseling or threaten you with garnishment through collection, the goal is to get the money out of your pocket and into theirs!

"Ah, but wait!," you say, "You are Jaded! You told us that already."

OK, fair enough. Answer this question. Go and schedule a credit counseling session. Will they work with all of your debts? Will they work with Dr. Smiths past due bill? How about the debt that Texaco charged off 4 years ago. Will they help you pay that one? Will they negotiate a deal? Will they work with your auto lender? My guess is that the answer to tose questions will be a resoundling no!

But let's go one better, will they work with any unsecured credit card that has been charged off and sent for collection. Again, the answer is no.

Fact #2: Credit Card Counselors work only with credit cards that are no in default. If you have been reading this website thoroughly, you know that banks win whether you pay or not! If the card has been charged off, they charged off that card on their taxes.

"OK, OK," you say, "You make some good points. But these guys are non-profit. Surely that means they are chairtable, right?"

WRONG.

Fact #3: The idea of non-profit does not mean they don't make money and don't charge you for services! The IRS just recently did a stufy of 43 non profit credit counseling agencies and found that they are rampant with abuse. Many of their non-profit status have been revoked because, indeed, someone was making quite a profit and at the expense of whom? YOU!

Fact#4: Credit Card Counseling looks no better on your credit report than bankruptcy. Because CCC can take so long if they get you into a Debt Management Plan, the result can actually be a much worse credit report.

FACT#5: Not all of your credit cards may agree to a debt management plan. If you get three credit cards into your debt management plan, but you still have two who do not want to cooperate, what have you accomplished? Nothing. Because when the creditor is suing in you in court and garnishing your wages, your debt management plan will not be able to help.

I am sure there are some reputable collection er, I mean counseling agencies out there. But from our perspective, we have always taken the view that a credit counseling agency was nothing more than a collection agency disguised in sheeps clothing.