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Bankruptcy is a Federal Law administered by the Federal courts. it is HIGHLY regulated and supervised by both the US Trustee and the Federal Court System. Credit counseling is NOT regulated and thus many are simply scams. Even the occasional legitimate one can only get rid of some of the interest, not the debt itself. With credit counseling, you still have to pay all of the debt, and most of the interest. So, at best you will lower some of the interest on some of your credit cards. At worse, you will be scammed out of thousands of hard earned dollars, and either way NONE of your debt will be legally discharged. Under chapter 7, ALL of your unsecured debt (credit cards, pay day loans, notes, lines of credit, etc.) will be DISCHARGED and you will never owe the debt again. Let's get more specific. Let's show you how Credit Counseling stacks up against Bankruptcy. Here are just a few of the things bankruptcy can do that credit counseling cannot: • Bankruptcy can get rid of the actual debt and, when you get rid of debt, you also get rid of the obligation to pay interest on that debt. Credit counseling can only get rid of interest, and then only some of that. With credit counseling, you still have to pay all of the debt, and most of the interest. The credit counseling pitch about getting you "Debt free" or the pitch to "Save you up to 60% in seconds" is false and misleading, at best. Credit Counseling makes promises, but only bankruptcy delivers a truly "debt-free" plan. • Bankruptcy lets you put your unsecured creditors under your control. Credit Counseling: The creditors are in control of you. • Bankruptcy can put your secured creditors under control. Say you are behind on your house or car loan, Bankruptcy can put these creditors under control giving you months and even years to catch up. This can take the pressure off, and can be the difference between keeping or losing your house and car. Credit Counseling can't do a thing with these creditors. • Bankruptcy gets rid of "pay day" loans. Credit Counseling can't do anything about pay day loans. • Bankruptcy can lower your monthly expenses, in the vast majority of cases, significantly more than Credit Counseling. Think about it. Bankruptcy can get rid of debt, and getting rid of a debt stops the payment permanently and completely. You never have to pay it ever again. Credit Counseling: you still have to pay the debt, because Credit Counseling, at best, only gets rid of some of the interest and never the debt itself. • Bankruptcy helps you start re-building your credit faster. It goes without saying that the first step in re-building your credit is to get rid of debt. Why? Because getting rid of debt puts you in a position to afford new credit, and because putting you in a position to afford new credit attracts new lenders willing to give you more credit. Credit Counseling doesn't get rid of debt, at best only some of the interest obligation. Thus, it takes you longer to get out of debt, and the longer it takes you to get out of debt, the longer it will take you to look attractive to new lenders willing to give you credit. Credit Counseling makes you less attractive to lenders, and therefore hurts your ability to get credit. • Bankruptcy can stop wage garnishments AND Bankruptcy can get rid of Federal and State income tax debt. Bankruptcy can put the IRS and State tax agencies under control, stopping wage garnishments and tax levies, and bankruptcy can actually get rid of significant Federal and State income taxes (as long as you qualify under 4 simple rules), Credit Counseling can't do a thing. Credit Counseling has no power at all over Federal or State income tax agencies. • Bankruptcy is highly regulated. Bankruptcy is a Federal law and has the full weight of the U.S. Federal government behind it. Credit Counseling is controlled by the credit card companies, who can change the rules of the game anytime they want. • Bankruptcy is an established system of law, procedures and regulations, created to protect YOU and is highly regulated. The Bankruptcy system is run by Judges and lawyers licensed to practice and closely regulated by State Bar licensing boards. Credit Counseling is controlled by the credit card companies, who can change the rules of the game anytime they want. The industry is completely unregulated, with no one to protect you at all. Is it any wonder so many people get scammed out of their hard-earned money by so many of these organizations. Its like hiring a fox to protect the chickens. • The Bankruptcy version of "bill consolidation" (Chapter 13) is designed to make sure that you can afford to make the payment. It also puts the full authority of the Bankruptcy Court to work for you to make sure you are not taken advantage of. Credit Counseling: Credit Counselors may put you into a payment plan even if you can't afford it because your ability to pay is not a major criteria of their plans. They can only offer to reduce some of your interest at best whereas, under chapter 13, the main criteria for your plan is your ability to afford the monthly payments. The harm of agreeing to pay a credit counseling repayment plan you can't afford is that if you can't afford to pay the plan payments, you won't complete the credit counseling payment plan, and if you don't complete the payment plan, your hard-earned money will be wasted, your family will be even worse off, and worst of all, the credit card companies will go back and add on all the interest, late fees and over-the-limit penalties, as if you never signed up for the credit counseling plan. In other words, you now owe EVEN MORE THAN WHAT YOU STARTED WITH IN THE FIRST PLACE. You lose, but the credit card companies that control the credit counseling agencies win because every month they keep you paying and out of the hands of a bankruptcy attorney is a month they make money. The bottom line: Instead of telling people how bankruptcy really works, and all the good things that can come from filing bankruptcy, the credit counseling outfits are forced to feed off the "stigma" that most people attach to bankruptcy because they just never ask to find out the truth about bankruptcy in the first place. Want to read more about bankruptcy and what it can do for you and your family? Go to our Bankruptcy FAQs Want to ask your questions over the phone? Use our free
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