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Home > Ask The Get Out of Debt Experts > I’m Worried About Going With ClearPoint Credit Counseling Solutions or Care One Credit Counseling. – Mike

I’m Worried About Going With ClearPoint Credit Counseling Solutions or Care One Credit Counseling. – Mike

“Dear Steve,

Married 3 kids combined income of about $90,000 gross. Have a home with an interest only mortgage that’s has a year left before it converts. We owe about $25,000 in credit cards. We want to get the debt taken care so we will have enough to refinance to a fixed rate loan to keep our house. Currently with credit card min. payments and other monthly expenses we can not afford to make a full mortgage payment. We are about $500 short each month.

We have been looking into debt management programs like ClearPoint Credit Counseling and debt settlement programs like Care One. Also have considered bankruptcy but do not want to loose the house. I read in Kiplingers about ClearPoint but when looking into it sounds like they probably can not lower my payments enough to make a difference. I contacted Care One they told me in order for us to get the payments lowered we would have to file for bankruptcy to scare them into a settlement and that would take up to 18 months and I would have to deal with debt collectors.

We are cunfused by which direction to go in, Debt Managment, Debt settlement, or bankruptcy?

Mike”

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The Answer

 

Dear Mike,

That is the first time I’ve heard of a debt settlement company telling someone to file bankruptcy to try to scare creditors into accepting debt settlements. It seems utterly pointless. Once you have the protection of bankruptcy there is absolutely no reason to terminate the case and settle the debts. I’m hoping that you misheard the Care One representative, otherwise, that was horrible advice.

ClearPoint Credit Counseling Solutions is a NFCC Consumer Credit Counseling Service (CCCS) agency. They offer a plain vanilla debt management program.

For more information on the effectiveness and success rates of credit counseling, debt settlement, and bankruptcy, see The Truth About The Failure Rates and Completion Rates of Credit Counseling, Debt Settlement, and Bankruptcy.

But I think the answer is clear in your situation. A credit counseling program is not going to work for you. You already don’t have enough money to make at least your minimum payments. And in a credit counseling program your minimum payments to creditors are going to be at least what they were before you entered the program. You don’t need interest relief, you need monthly cash flow relief.

Making that full mortgage payment should be your top priority. make it. Credit card payments come second.

The legal and logical solution here that reduces your payment and allows you to keep the house is a Chapter 13 bankruptcy. I urge you to click here to find a local bankruptcy attorney you like.

My fear is that if you don’t go bankrupt you will enter a debt settlement program which will destroy your credit and cost you a whole lot of money for nothing, or a credit counseling program that is not sustainable for you.

Big Hug!

Im Worried About Going With ClearPoint Credit Counseling Solutions or Care One Credit Counseling.   Mike
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About Steve Rhode

Steve Rhode
Steve Rhode is the Get Out of Debt Guy and has been helping good people with bad debt problems since 1994. You can learn more about Steve, here.
  • Cmlahna

    Dear Steve,
          The information in here about a debt management program is innaccurate, I’m not sure why you would push someone into bankruptcy while they have other options!  A “plain vanilla” debt management program would have reduced Mike’s payments substantially!  Debt settlement and debt management are completely different options.  Clearpoint does not even offer settlements, they offer debt management programs.  DMPs LOWER monthly payments and do NOT destroy credit.  Your statement, that “in a credit counseling program your minimum payments are going to be at least what they were before you entered the program,” is completely false.  Consumers in debt need to be very careful who they take advice from and avoid biased attorneys looking to profit from them filing for bankruptcy.   

    • http://GetOutOfDebt.org Steve Rhode

      So let’s talk specifics and effectiveness. Take Bank of America as an example. What is the minimum payment required on a monthly basis and then on a monthly basis on a DMP.

      A DMP will not give you much, if any monthly payment break from the minimum required on your current debt, but can reage your accounts if you are delinquent.

      I’m interested in the basis for your substantial reduction claim. How would it have substantially reduced the payment?

      I’m not sure if you also read the linked article on performance measurements of the various solutions. Do you disagree with those as well and if so, can you cite a source of performance numbers that is substantiated?

      • Cmlahna

         Steve,
        It varies by situation.  The best option for people with debt is to go through credit counseling first.  It is free and offered by many companies.  They do a budget analysis, check your credit score, and evaluate individual situations.  From there, they can tell you if you should speak to an attorney about the possibility of bankruptcy or if a debt management plan is sufficient.  For some people, they just need to understand how to budget better.  It’s impossible to know which option is best without evaluating a person’s financial situation in depth.  Bank of America has very strict regulations for offering a lower interest rate for their customers.  Almost all other companies offer a huge reduction in interest rate for people on a debt management plan.  29.9% interest rates are often brought down to about 9% and 12% interest rates tend to be lowered to about 6%.  It depends on the creditor of course, but for many people, that interest rate reduction is more than enough to get them out of debt. 

      • http://GetOutOfDebt.org Steve Rhode

        Why should someone go through credit counseling first?

        If the problem is the monthly budget is too tight and does not provide for sufficient savings, how does the reduction in interest rate solve this problem when it doesn’t lower the payment?

  • http://Website Rae

    Hey I am not married but just entered into the debt settlement program with Care One it has given me $500+ in cash a month. I was never behind on any bills or late but because of taking a pay cut and having my students loan grace perios over, I had to make some decisions and as much as it hurt my pride, I enrolled in the debt settlement program. To my surprise, it has helped me greatly!!
    My montly payments were cut in half and I will be able to pay off $35,000 of credit card debt in 3 or less years. I say contact Care One and see what options they offer. They also set you up with counseling and a workable budget:)

    • http://GetOutOfDebt.org Steve Rhode

      Rae,

      So are your creditors getting paid at least the minimum payments they require each month or are they saving up funds to settle latter with your creditors?

      Steve

  • Sherry

    After reading all these comments I’m more worried and confused than before. My husband and I are about $60,000 in credit card debt. We’ve accumalated this over the past 5 yrs. We take full responsibility for this. Most of it is because we were living above our means. We’ve always lived paycheck to paycheck. So any vacations, car repairs, vet bills, High School Senior activities, graduation, college etc. has been above our earnings. So of course we charged everything. Before we knew it we had hit the $60k mark!!! Now we don’t have enough to even pay minimum due. We have paid one card with another (which I know is a big mistake!), have to charge our groceries, and so on. I tried calling our cc companies but since we haven’t actually be delinquent (just late) on payments there is nothing they will do for us (such as lowering payments and APR’s). I then contacted Clearpoint Credit Counseling. They had a “solution” set up to make $1480/month payments to creditors. That’s about the same amount were are short each month to pay bills as it is!! So now I’m at the point of not knowing where to go next to seek help. What is the next step??

    Sherry

    • Til_Debt_Do_Us_Part

      Sherry I’m in the same boat, and I know how you feel! My wife and I got married 1 1/2 ago, and placed the bulk over everything on my CCs. Not a wise decision, but then again, we never thought we’d loose 150k in equity in 2yrs either. Bankruptcy is NOT an option. Your monthly payments are about the same as mine (1500). I say keep making those payments with the “snowball” effect.

      Find an extra job, to get those payments rolling. It’s really tough when emergencies happen! At any rate, good luck.

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