Do You Recommend Credit Counseling or is There a Better Way? – Danny

“Dear Steve,

My wife and I have accumulated 40,600 in credit card debt. We are way over our heads, however, we have been able to make ALL of the payments on time. We are just barely making it though. We make over 118,000 a year together.

Do you recommend credit counseling or is there a better way?


Dear Danny,

I know it is probably little comfort but your situation is not all that uncommon. Loads of people are making good money and just making it paycheck-to-paycheck, month-to-month. Digging yourself out from that hole, from the brink, is the hardest thing to do. If you jumped off the cliff and filed bankruptcy your debt would vanish much faster but there you are, able to pay at least the minimums, struggling along, and probably not an appropriate candidate for bankruptcy.

So let’s look at credit counseling for a moment. Credit counseling, or debt management, is an imperfect solution but better than the alternatives, nothing. In the United States a credit counseling repayment plan is determined by what the creditors demand from the credit counseling agency. In other countries the monthly payment is determined by what the consumer can realistically afford. I know, it sounds backwards in the U.S. and that’s because it is.

Also in America, the credit counseling groups get paid by the creditors based on the amount of money they collect from the consumers. This creates a huge conflict of interest. After all, whose best interests is the credit counseling agency supposed to represent?

But all that being said, you can’t escape the fact that going into a credit counseling program can lower your interest rates being charged by the credit card companies. It also stops fees and penalties that you might be getting charged as well. If you were behind in your payments then participating in a credit counseling program could lower you payment back down to the regular minimum. So while I do complain about the conflict of interest issue there are still some attractive benefits worth investigating.

The final concern is that entering a credit counseling program can also impact your credit score but then again your score is probably getting hammered because your debt to income ratio is already crazy and you are maxed out.

Bottom line, you should investigate a debt management program and see if it is right for you. Once you get all the facts, then you can make an informed decision. My favorite kind.

You can click here for debt management information if you’d like.

The hardest step to take to get out of debt is the first one, but don’t worry, I’m here for you if you need more help.


Steve Rhode
See also  Why Most Debt Settlement Companies and Credit Counselors are Bad Medicine

2 thoughts on “Do You Recommend Credit Counseling or is There a Better Way? – Danny”

  1. Billy,

    You brought up a very good point I forgot to mention. If you go into a debt management program and make payments for any period of time and then decide that bankruptcy is better for you then you’ve thrown those previous payments away in a sense. But maybe that time in the debt management program helped you to clearly see what is the best path for you to follow without reservation or guilt. In that case, the cost of making the payments at least gave you clarity and confidence to move forward.


  2. It is good that you are actively looking for solutions before you begin the downward spiral of missed payments and eventual bankruptcy in many cases. Planning ahead when you see the writing on the wall is a move that most avoid as it is easier to pretend you are not in a tight situation. Evaluating your options and deciding if you will be able to complete and follow through with the program is key. Starting a debt management program only to give up in a year will often be a waste of time. Evaluate all the pros and cons of your different options including: Cost (fees), timeline (how long is the program going to take?), interest and principal costs (how much, overall, will I pay?), Credit Report consequences (will it harm my credit? by how much? How will I recover from it?) among other questions.


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