Financial Counseling vs. Bankruptcy
I Heard That . .. A Counseling Program is Better than Bankruptcy for my Credit.
Sometimes this is true, more often it turns out to be about the same and costs more.
Typically if you are simply having trouble managing your budget to deal with a small amount of debt compared to your income, a personal financial counseling program could be a good idea.
Is Credit Counseling For You?
Credit Counseling Programs
We will refer folks to counseling when appropriate. It is also important to shop carefully for credit counseling programs as they are not regulated in many states and some have turned out to be scams. In Eastern Missouri, we would recommend only the local office of Consumer Credit Counseling, now known as Clearpoint. Other services, particularly those over the Internet in distant states, may provide the same payment plan services but at higher cost and are typically less helpful. (Some additional reading about counseling problems (PDF) and reputable counseling (PDF).)
Keep in mind that what may look like a credit counseling operation on the Internet or TV may actually be a debt settlement company. These are typically bad news for consumers and may actually be illegal in Missouri.
Understanding Repayment
Repayment Programs & Credit Impact
A repayment program is often as bad on your credit report as bankruptcy. It says the same thing: This person got into trouble with debts. Some creditors even seem to take advantage of folks trying to “do the right thing” by increasing their interest rates through such programs. They are not required to continue accepting the repayment plan instead of suing or collecting directly from you, either. It is all voluntary, for you and them.
Bankruptcy
Federal Protection & Debt Solutions
Bankruptcy is anything but voluntary for most creditors since a federal court steps in to protect you. Also most credit counseling programs do not address the entire debt problem, including homes and car loans.
