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If U.S. Court Bankruptcy Video Can Say Debt Settlement Is an Option, Why Can’t Credit Counseling?

I was watching a video put out by the Federal Judiciary on the U.S. Courts site and was surprised when I saw they U.S. Courts listing debt settlement as an alternative to bankruptcy.

The list also includes credit counseling, working with creditors (reduction in payments), and selling assets or debt consolidation loans to satisfy debts.

What struck me is that logic would say that outside of bankruptcy any approach that allows a consumer to address their situation is a potentially valid approach. Yet credit counseling groups continue to slight debt settlement and not embrace it as a viable and possible solution at the detriment of the very consumers they purport to assist.

The attack on debt settlement by credit counseling has become so embarrassing that credit counseling appears to be clearly doing the consumers they are supposed to serve, a disservice. They may be offering up more harm than good at the hand of the creditors that guide them.

The U.S. Courts video just drove that point home for me. If settling debts is a viable solution recognized by the U.S. Courts, along with credit counseling, then why is credit counseling attacking debt settlement or dismissing it as a viable option in some situations?

I understand the point there were many debt settlement entities that did not offer a well structured product or good customer service, but the criticism of those companies was not about the premise of debt settlement but the way they sold it and collected advanced fees.

Credit counseling needs to get real about all of the solutions that consumers need to get out of debt and not shield consumers from knowing the truth about each and/or evaluating consumers fairly for each possible solution to give a fair and balanced charitable service.

You can watch the full U.S. Court bankruptcy video below.


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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.
  • Gudadvic

    One major thing that consumer need to understand with settlements are certain factors:
    1. Debt settlement remains on you credit reports for 7 years ( the same as filing Chapter 13)
    2. You need to get the settlement offer In Writing before paying Anything, otherwise the creditor could claim the offer was never given, and still sue the consumer for the debt that was supposed to be settled ( unlike BK which gives a consumer legal protection)
    3. You can settle your debt alone, you do not need to pay a company to settle for you
    4. Any amount over $600 that is settled upon with a creditor, becomes taxable income (form 1099c)
    Just want to make sure consumers are aware of this, since you are suggesting settlement as a good option…

    • Steve Rhode

      Agreed with everything except you forgot to mention the IRS waiver for taxes on #4 if you are insolvent.

  • AA

    Non profit debt management companies are nothing but puppets whose strings are held tightly by the banks that pay them “fair share” and because of this, they will never acknowledge debt settlement as an option.  

    What is most alarming is that with multiple regulatory agencies regulating the same industry, none of them see anything wrong with the bank-non profit relationship that harms the consumers who are unable to afford the payments in a debt management plan.  

    We all know there are regulators scouring this site so to them I say…shame on all of you clowns for allowing this to continue.  

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