Question:
Dear Steve,
I’m living on permanent disability and dealing with credit card minimum payments that are eating most of my monthly income.
I have been told that ACCC American Consumer Credit Counseling (the nonprofit organization) is great at reducing interest rates and monthly payments by 50%. Is this true? Are they reputable?
What could this end up costing me in fees?
Thanks.
Ariana
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Answer:
Dear Ariana,
If you’ve already talked with a credit counseling group or ACCC, I hope they made it clear that you might not have to repay your debt.
Federal law protects disability income from collections. However, given your specific situation, it might be financially safer to manage to deal with collectors than spending disability money on debt that does not have to be repaid.
Eric Olsen is the Executive Director of the nonprofit law firm HELPS. He previously posted an article titled “When Bad Debt Advice Hides Behind Good Advice.”
Eric’s post was about a 70-year-old woman that repaid $63,000 worth of debt through a nonprofit credit counseling group that put her into a debt management plan.
While his post was directed towards the senior woman, the opinions expressed are still valid. Eric said, “Most seniors don’t understand that federal law protects their social security, pensions, disability, and VA benefits from debt collectors. This money is protected for seniors’ needs. It cannot be taken or garnished.”
That is a true statement for many.
He went on to say, “Nonprofit debt management companies advertise free services or a minimal monthly fee to help people in debt. But what they don’t disclose is that they have a prearranged agreement with the credit card companies and other lenders on whose behalf they collect.” I’m not sure what ACCC has explained to you. It is worth asking them for more information on their relationships with creditors.
Mr. Olsen pulled no punches in his statements about the lack of disclosure of information by Money Management International another credit counseling outfit. You can replace the word disabled for seniors when he said, “Most debt management companies withhold information about the protected nature of seniors’ income so that uninformed seniors will enroll in their services.”
I am not saying ACCC is acting in bad faith here. When it comes to delivering a debt management plan, I think they are as competent as the best in their field. But that’s not the issue. We need to figure out if you should consider a debt management plan with any nonprofit credit counseling group.
At this point, you don’t need me to tell you what to do. What you need is more information to make the best decision for yourself.
I would suggest you talk to the people at the nonprofit law firm HELPS and also with my debt coach friend Damon Day. He can give you an independent third-party analysis of your situation.
You can also talk to the people at Money Management International, the credit counseling group that was the focus of Mr. Olsen’s post. In the comments to Eric’s post, MMI said, “Just because a consumer receives protected income doesn’t mean they cannot be sued or a lien placed against a property if they are a homeowner. The decision to default on debt comes with consequences, including credit and legal, which should be carefully researched and considered.”
That is a true statement.
MMI also said they created a post that gave specific advice for people with disability income. You can read that on their site. It is titled “What Does It Mean to Be Judgement Proof.”
I could not find a similar post on the ACCC site.
I have found that, in general, a nonprofit credit counseling Debt Management Plan can reduce the interest rates and give you one monthly payment. Payment reductions are not as significant as they used to be. Sometimes monthly payments can even go up.
Any nonprofit credit counseling group can offer you similar benefits since the creditors dictate the terms. The credit counseling agency is not calling the shots here.
ACCC and HELPS have opinions about what is best for you. It would help if you listened to what they both had to say without any obligation to do anything.
Here is what you should ask whoever you contact for help. “I live on permanent disability, and I live in X state. I’m struggling to make ends meet each month and can’t afford the minimum payments on my disability income. I’d like to hear your opinion if I am judgment proof and if my income is protected. If it is, how can you help me deal with collectors?”
After that, please come back and post an update here and let me know what they said.
If you find out you are judgment proof and could stop paying your creditors, which makes more financial sense for you given your income and situation, that is a legitimate thing to do.
But it might be emotionally satisfying to continue to use your disability income to repay what the credit counseling program requires to satisfy your creditors, even if that leaves you limping along. If you are aware you are making payments that might leave you in a disadvantaged financial position, which is what you want to do, then that’s your choice.
Another option I have not mentioned yet is you could file bankruptcy and have all your debt legally discharged in about 90 days while legally closing the door on that debt forever. That can give you a lot of peace of mind.
To learn more about what bankruptcy would mean for you, talk to a local bankruptcy attorney for free. Find one near you licensed to practice law in your state and discuss your situation with them.
The more facts you can gather, the better the decision you will be able to make for yourself and your situation.
You are not alone. I'm here to help. There is no need to suffer in silence. We can get through this. Tomorrow can be better than today. Don't give up.
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If a senior receiving SS and a pension or a person receiving disability contacts a debt management company for help and are not told that their income is protected by federal law and can’t be taken they are not being given complete information. I am glad to hear of MMI’s commitment to advise persons of their protected income. Eric HELPS Nonprofit Law Firm
Ariana, ACCC is a reputable agency. The question is really whether a DMP is viable based upon your budget, providing first for your basic needs. If so, then a DMP may help. If you have not already, you may also want to discuss your situation directly with the creditors to see if they can offer relief through an in-house hardship plan.
Regarding your question on fees, you can find fee information on both ACCC and the agency I work for, MMI, here:
https://www.nerdwallet.com/article/finance/compare-debt-management-plans
Thank you for the comment Thomas.
As information, the senior who was the target of Eric Olsen’s post is a homeowner and was still employed throughout the time she was enrolled in MMI’s debt management plan. As such, was not judgement-proof.
As also mentioned during her FOX26 interview, she still took vacations while repaying $63,000 in just over four years, an indicator that she was fully capable of – and comfortable in – repayment. Additionally, she increased her credit score by 163 points in the process; an achievement that would not have been possible within the same timeframe had she chosen to default on her creditors or declare bankruptcy. Here’s her story: https://www.fox26houston.com/news/pearland-woman-paid-off-63000-in-debt-with-credit-counseling
Ariana may be judgement-proof, but there appears to be no financial parallel between these individuals based on the facts. Eric’s original posted targeted MMI and our client purely on the basis of her age, while the point of his post had no merit based on her actual situation. It was a topic he wanted to discuss based on his own nonprofit’s mission, and he used our client’s success story as an excuse to shoehorn his point. Understandable, but perhaps an overreach, and it should be expected that MMI will defend our client and ourselves.
All that said, MMI will remind our counselors of the judgement-proof scenario in the goal of fully educating those who collect protected income.
Thank you for raising awareness of what it means to be judgement-proof. As the son of a retired senior on protected income, I have the same desire to make sure their rights are understood.
Thomas, The client you mentioned from MMI, is clearly in a different situation. You and I can confidently say that every client’s situation is different and complicated. I applaud your efforts to raise the awareness of being judgment-proof.
I am not pointing fingers at either ACCC or MMI. Instead, I tried to make this reader question serve as an example of an ongoing issue in all segments of debt relief, from settlement, validation, counseling, etc.
Ultimately the debtor has to gather multiple opinions and facts to conclude what solution path is best for them.
Let me be 100 percent clear that for any consumer a Debt Management Plan is the right solution I have faith and trust in both ACCC and MMI to deliver that product.
Should I go with ACCC?
Thank you o much for your question. I also made your question into the podcast of the day.