Written by Summerville Bankruptcy Attorney, Russell A. DeMott
You want to avoid filing bankruptcy. Everyone does. What are your options? What about credit counseling?
Let’s first define what I mean here. First, there are two kinds of “credit counseling.” There’s the credit counseling you must do prior to filing your bankruptcy case. That’s the silly requirement of the new bankruptcy law, BAPCPA (“Bankruptcy Abuse Prevention and Consumer Protection Act”). But I’m not talking about that kind of credit counseling, and you probably aren’t, either.
We’re talking about a program where you meet with a financial counselor to go over your bills. The counselor comes up with a budget and attempts to negotiate a repayment plan with the creditors. For example, say that your minimum monthly credit card payments are $1500 per month. The credit counselor may try to get the payments down to $1000 per month by getting interest reduced, suspended, or waived. Can it work? Yes, it can. But only rarely.
Why? Creditors routinely engage in self-destructive, illogical behavior. You know this if you’ve tried to reason with them. They want all the cookies in the cookie jar. If they don’t voluntarily agree to the treatment you propose through the credit counseling agency, the plan doesn’t work. You can’t make them accept your proposal!
For some clients, however, this is worth a try, and I don’t discourage it in the right situations. Can you pay your mortgage? Car payment? Food? Utilities? If all your income goes for these basics, you probably don’t belong in a credit counseling program. You need to have enough money to live PLUS extra for the credit counseling.
If you want to try credit counseling, I’d recommend you meet with an attorney first so you can explore all your legal options. A credit counselor is not qualified to give you legal advice; only a licensed attorney can do that. At Wyckoff & DeMott, we don’t sell bankruptcy. We try to find the right solution for each client’s unique needs. And sometimes that may be credit counseling.