Credit Counseling is it the right thing

iVillage Member
Registered: 02-03-2005
Credit Counseling is it the right thing
10
Mon, 04-21-2008 - 2:23pm
I have just entered credit counseling. I hope that is was the best thing I have done for myself. It's something I had to do to get my life back on track. I want to be able to marry my boyfriend in a few years and know that my past debts will be behind me by then and we can look at buying a house. I nearly died when the counselor added up all my debts.... I wanted to cry.... I didn't know how I could have put myself in the position. And I got so angry at myself for not taking control of this problem years ago. I could have been out of this situation and enjoying the money I am making. It has taught me a lot of things, that's for sure. Some people have criticized me for taking this route instead of taking a line of credit and paying off everything in a lump sum. Apparently this would have recovered my credit rating quicker. But I have no equity so no bank obviously would take me on, especially with my credit history. Some other people suggest bankruptcy. I guess I don't know enough about it to take a that route. I guess my bottom line is which is better credit counseling or bankruptcy? Which costs more? And if you are already in credit counseling can you file for bankruptcy? I just thought credit counseling looks better than bankruptcy because an effort is being made to repay your debts.
iVillage Member
Registered: 03-17-2003
Mon, 04-21-2008 - 2:57pm
There are many different credit counseling agencies to choose from.
iVillage Member
Registered: 03-27-2008
Mon, 04-21-2008 - 11:40pm

Hello:

I am someone in exactly in the same boat. I am in debt of over $35,000 and have no assets to get a loan or anything.

So I too will do credit counselling next month and know that this is the better way to go. Even if I moved in with my boyfriend my debts would still be there and he would not pay them. My debts are a result of lost jobs, insurance policies not honoured and more.

It is a good step.

Hugs

iVillage Member
Registered: 11-07-2007
Tue, 04-22-2008 - 11:41am
I'm not sure which is better. They both put a huge black mark on your credit report for 7 years and will affect your credit rating in a huge way. When you go to buy a home, I would keep your name off the loan if possible because if he has good credit then you'll get a better mortgage rate. These days, bankruptcy is more like credit counseling. You have to repay the debt and your creditors agree to accept a lesser amount. It's very difficult anymore to file for the type of bankruptcy that wipes your slate clean. Plus with bankruptcy, any of your retirement, stock, etc. can be taken to pay it off.
iVillage Member
Registered: 03-17-2003
Tue, 04-22-2008 - 11:55am
In bankruptcy many assets are protected including, but not limited to retirement accounts, stocks, bonds, investments, homes, cars, furniture and furnishings, clothing, etc.
Avatar for mahopac
iVillage Member
Registered: 07-24-1997
Tue, 04-22-2008 - 4:25pm

This is NOT true! "They both put a huge black mark on your credit report for 7 years and will affect your credit rating in a huge way."

I went through CCCS, and it has had little to no effect on my credit rating, which was "good," not "excellent" to begin with and hasn't changed. A year after going onto the plan, I bought my first home, and a year after that, I bought a new car. A DMP should not affect your ability to get secured credit. It did not have much, if any, effect on my mortgage rates (5.25%), HELOC (6.0%), or car loan (5.35%) or my ability to qualify for them. Obviously while on a DMP I wasn't able to apply for *unsecured* credit, but no one on a DMP should be applying for unsecured credit anyway.

Bankruptcy, on the other hand, would have definitely been a black mark that stayed on for years, would have impaired my ability to buy my first house, and would also have gotten me kicked out of my company, where a clean credit rating is imperative because of the nature of my business. For anyone who is considered self-employed, bankruptcy can have repercussions far into the future.

Credit counseling usually means you're paying off the debts you have incurred, dollar for dollar. Bankruptcy usually means you're paying off less than you owe. There is a BIG difference to creditors whether you pay off what you owe or whether you pay them 50 cents (or less) for every dollar you owe them.

Kelly

iVillage Member
Registered: 04-02-2003
Tue, 04-22-2008 - 4:30pm

No way would I ever use credit counseling. You need to learn how to change your own behavior and not leave it up to someone else to clean up your mess...so to speak.

While credit counseling doesn't really impact your credit report, a debt negotiation program will. You might want to read this Federal Trade Commission article (towards the bottom):

http://www.ftc.gov/bcp/conline/pubs/credit/fiscal.shtm

And here's another good article from the FTC showing you how to pick the right consumer credit counseling program without getting scammed:

http://www.ftc.gov/bcp/conline/pubs/credit/repair.shtm

If you are truly ready to change your lifestyle and get rid of your debt, I would do it myself. There is no better way to start than by reading "The Total Money Makeover," by Dave Ramsey.




Edited 4/22/2008 4:34 pm ET by rahammy
iVillage Member
Registered: 11-07-2007
Tue, 04-22-2008 - 4:55pm

Kelly,

Things have changed a lot then. When credit counseling first came out, it put the same black mark on your credit report that bankruptcy did. Some credit counselors do bargain with the creditors for a reduced amount so you are not actually paying dollar for dollar back all the time. Regardless, I'm glad it didn't put a black mark on your credit. That's great. There really was no reason to shout though.

Kathleen

iVillage Member
Registered: 03-17-2003
Tue, 04-22-2008 - 5:57pm

"Bankruptcy, on the other hand, would have ...impaired my ability to buy my first house..."


Many people anticipating bankruptcy want to know if they will ever be able to buy a house.

Avatar for mahopac
iVillage Member
Registered: 07-24-1997
Tue, 04-22-2008 - 11:04pm

Love your last line. ;)

My purpose in writing was to share that credit counseling doesn't have the same effect on your credit rating as bankruptcy, and that bankruptcy may have ramifications that don't become clear until later. All of what I said was quite true to my personal situation; I didn't say it would be true for everyone. For example, I'm not employed, I'm a partner in a firm, which makes me a business owner, not an employee. One of the terms of my partnership is that I can be expelled from it if I file for personal bankruptcy, since it could impair my partners' ability to get lines of credit to operate the business. Also, if I had filed for bankruptcy rather than going on a DMP, I would not have been able to buy a home *when I needed it* which was within one year of starting credit counseling, when my landlord decided to sell the house we were in.

My point was that the poster should find out for herself *all* the ramifications of bankruptcy filing, some of which may not be obvious, and to caution that there is still a difference between a DMP and bankruptcy. While The Donald may have filed for bankruptcy, his situation and everyone else's here are considerably different; he's got an army of lawyers to look out for his best interests.

Kelly

iVillage Member
Registered: 03-17-2003
Wed, 04-23-2008 - 11:39am
I can't speak to the terms you agreed to with your employment, it is nevertheless important for anyone contemplating bankruptcy to understand it is against the law for any employer to discriminate against you for filing bankruptcy.