Christian Credit Counselor Tells Us to Go to CCCS or Debt Settlement Instead. – Shelly


“Dear Steve,

I lost my job in 2005 and for a year and a half, we lived on one income (with a little extra from my part time jobs) on a two income budget. We used credit cards to help us during this time. Although I am now working full time, all we manage to do is make minimum payments and are getting nowhere fast.

We cannot afford to make more than the minimums and are considering either doing a debt settlement or using a consumer credit counseling service. We have been advised by a Christian debt counselor that we know personally to do CCCS because of his convictions (not necessarily ours). I had been ready to do the debt settlement thing where you put aside money in escrow and stop paying the credit cards, etc. until I found out from him that the credit card companies can send you a 1099 and make you pay taxes on what you did not pay them–they can consider it money in your pocket I guess.

The Christian counselor made me feel like a horrible person for even considering the debt settlement; however, his warnings about them did make me reconsider. I have since gotten past the guilt and just want the quickest, cheapest, and best way out of this. We figure that with the 25%+ interest rates we are paying on most of our credit cards, the companies have collected enough to have paid off our original debt with them!

What do you think we ought to do? I have a couple of companies that have offered me a deal where for four years I pay about $200 (compared to about $750 in min. pymts. right now that is getting me nowhere) to settle my debt of about $17,000. What do you advise??? Thanks!


Dear Shelly,

You seem to have found one of the few really religious Christian credit counselors around. I suppose there are a number of ways of looking at your situation. On one hand you did enter into a promise to repay your lenders at a certain interest rate, which they could change, again according to your mutual contract. Apparently your Christian credit counselor feels you will go to Hell if you don’t repay all the money plus interest. Or if not Hell, then you need to go elsewhere for help.

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The Christian credit counselor is correct that you will get a 1099 for the forgiven debt and it will be treated as income. Additionally, the debt forgiven in a debt settlement will appear as a negative item on your credit report. From a purely religious point of view, so what. Those are simply the consequences of your actions.

The focus here seems to be the process on how to get out of debt rather than addressing the situation that has led you into trouble. That is what our attention needs to be on.

Biblical or logical, the path for you to get out of debt is not clear at all based on what you’ve shared. I’d really need to know what the issues were that led you to this juncture and what is preventing you from repaying your debt at this time.

Personally, I think as long as you shop for a way to get out of debt that is based primarily on how you want to feel and your terms that you are likely to be a candidate for getting scammed. No real solution let’s you walk away from debt without consequences or damage to your credit.

The deal you’ve been fed sure sounds like a monthly payment debt settlement approach. Not much good can come from this. During the time you are sending money to the debt settlement company you may get sued by your creditors. Also, most debt settlement companies will keep the first $4,000 to $5,000 of money you send as payment for their services rather than saved for settlements.

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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9 thoughts on “Christian Credit Counselor Tells Us to Go to CCCS or Debt Settlement Instead. – Shelly”

  1. Steve,

    Thanks for sharing with us, I’m sure you know there’s been quite a few changes to the bankruptcy law since your experience, and it looks like the days of easy credit after bankruptcy have passed us by, unless you are willing to pay the price in finance charges or wait a few years.

    With credit card companies and banks taking losses and tighten up the strings, I’d be willing to bet the future is more favorable to those who are settling debt versus not paying them at all or going through bankruptcy, however that is just my opinion and I could very well be wrong.

    No matter what we both know there are two things needed to get out of debt and rebuild credit- those are time and money. So everyone should look at their credit, debt, and budget situation now, think about future plans, then make the best decision on if they want credit counseling, debt settlement, or bankruptcy.

  2. Steve,

    Being sued by a creditor would create a public record, however the majority of collection agencies or first party creditors typically don’t pursue legal action unless they can determine it to be cost effective- They talk a mean game on the phone but if they can’t determine you have the means to pay them back thru the legal process, more than likely they won’t pursue it. When a collections shop buys bad debt, they are already in the hole, even when it is pennies on the dollar, now do you really think they want to spend more money for their collections efforts- or agree to a settlement which will turn them a profit?

    After spending 7 years of my career in credit collections, I can tell you this happened very rarely in my own personal experience. I believe many people turn to bankruptcy as their answer because they lack the knowledge of the debt collections process and their rights under the fdcpa.

    You can file bankruptcy, but that may not change the underlying problem, which is living on borrowed money, instead of the cold hard cash in your budget.

    I applaud you for helping others out of debt for over 15 years. Would you care to share more with me about what you experienced with bankruptcy?

    What year did you file?
    What chapter?
    What did the attorney cost?
    How much debt did you eliminate in this process?
    When did those phone calls really stop?
    When did you finally stop getting bills in the mail?
    How many court dates did you have?
    How much time did that take out of your schedule?
    What was your first interest rate on the next house, car or credit card you got after bankruptcy?
    Is this still on your credit today?

    I believe these questions should be shared with anyone who might be considering bankruptcy, as every case is different, I think the public should know more about what really happens to someone after a bankruptcy.
    .-= Ryan Ortega´s last blog ..Top 3 mistakes consumers make in a debt settlement program. =-.

    • Ryan,

      What year did you file? 1990

      What chapter? 7

      What did the attorney cost? I don’t remember what the total cost was but a few years ago I made a big framed piece for my wife of our life in checks. One of those checks was a payment to the bankruptcy attorney of $655. I’m not sure if that was the full amount or not.

      How much debt did you eliminate in this process? $25,000. Ironically I tried to pay my creditors back after my bankruptcy and half told me not to.

      When did those phone calls really stop? Almost immediately, at least within a few months. I don’t remember it being a problem after filing. If someone called we gave them the case number and that stopped it.

      When did you finally stop getting bills in the mail? Not sure but not long after. I disregarded them after filing.

      How many court dates did you have? One

      How much time did that take out of your schedule? Half a day. Actual time in court was ten minutes.

      What was your first interest rate on the next house, car or credit card you got after bankruptcy? My first credit card was a secured card. I paid the card off every month so whatever the interest rate was didn’t matter. I bought a house two years latter on an FHA mortgage at whatever the lowest rate was at the time. I had rehabilitated my credit in the mean time with the secured card and had been able to save for a down payment so my score was high enough for the best rate.

      Is this still on your credit today? No. Nobody would know if I didn’t mention it.


  3. Steve,

    Bankruptcy is a public record, vs debt settlement, which only shows late payments and settlements on your credit report- you choose who sees your credit; with public record you don’t get to choose who sees that you have filed bankruptcy.

    It is a legal right we have, however I believe most American want to avoid it at all costs. I don’t want anyone to make a financial decision on emotion, but rather using logic and basic math. Not everyone qualifies for debt settlement, bankruptcy or credit counseling. It takes some time to figure which is best for your budget and your credit future

    You bring up a disturbing point- “I would bet you that a person going bankrupt today would be able to purchase a home, a car, and get unsecured credit faster than a person that began saving monthly payments towards debt settlement starting today.” my concern with this is why would someone who can’t afford to keep up with their bills need to finance anything else??

    If you are choosing to get out of debt, then you will have to stop using credit, period. Credit is used to leverage debt. Being over-leveraged in credit creates a huge debt situation. We both know the interest rates after a bankruptcy discharge are high, so who in their right mind would consider financing at enormous rates, when they could just continue to pay what they already owed?

    Credit can be brought back to life no matter what process is used to eliminate debt, however a public record will stay on file after bankruptcy discharge and with debt settlement there is no public record, and your credit, well that’s private and where most people would like to keep their debt situations
    .-= Ryan Ortega´s last blog ..Top 3 mistakes consumers make in a debt settlement program. =-.

    • Ryan,

      If falling behind and settling your debts will appear on your credit report for seven years and a chapter 13 bankruptcy will be reported on your credit report for seven years. What is the difference?

      I suppose where I am stuck is that the decision to use the right tool to address the realities of the situation should be made based on the situation at hand and not based on a fear of a “public record.” Additionally, just looking at the situation statistically bankruptcy is certainly worth a close look considering the far superior success rate of debt elimination in bankruptcy versus debt management or even debt settlement. See The Truth About The Failure Rates and Completion Rates of Credit Counseling, Debt Settlement, and Bankruptcy.

      I bring up the point about being able to buy a home or car, not as a goal to achieve but to dispel the common misconception that many have that bankruptcy alone is something that will prevent you from getting access to credit in the future.

      I went bankrupt and I admit that it felt like a lonely and scary process at the time. But that doesn’t mean that it wasn’t the right thing for me at the time. I’m not trying to justify my decision here. And for the record I have, in the past, successfully helped people to settle all of their debt with lump-sum settlements when they had the cash on hand.

      I would not avoid having heart surgery that was the best treatment for a disease if it would leave a huge scar on my chest. I’m not convinced that the “public record” argument is a reason not to seriously consider bankruptcy as an appropriate tool to get out of insurmountable debt.

      Since helping people with debt problems since 1994 I just have not met more than probably five people in very specific jobs that were precluded from those jobs simply because of a past bankruptcy. So if you can get a job and credit after bankruptcy, what is the danger of a “public record.”

      By the way, wouldn’t being sued by a creditor while in a debt settlement plan be a “public record” as well?


  4. For the purposes of disclosure, I am a bankruptcy attorney and a member of the National Association of Consumer Bankruptcy Attorneys. I also a born-again Christian and I get really irritated when “Christian” debt counselors make you feel like dirt for being in debt. If you want to see what the Bible really says about bankruptcy says, I’ve written an article on my blog about it:

    I’m also not a big fan of debt managements plans. Debt forgiveness achieved in bankruptcy is not taxable and Chapter 13 repayment plans are almost always superior to debt management plans. Please my article on that topic as well:

    Do yourself a favor and at least consult with a qualified bankruptcy attorney to learn all of your options without the guilt.
    .-= Carl H. Starrett II´s last blog ..California’s 90-Day Foreclosure Moratorium Really Isn’t =-.

  5. Shelly,

    Steve is right, there are consequences in any debt relief option and the best thing to do is find the program that suits your budget and needs the best. It’s not an easy journey; however after briefly reading over your story, I can tell you have the desire to change your credit card habit to become debt free.

    Unfortunately creditors will send out 1099-c for charged off debts or cancellation of debt, for settlements made prior to charge off, however depending on your situation, your family may be considered insolvent if there is no positive net worth achieved. I would consider talking with a tax pro about this; personally I feel if your budget can afford it debt settlement is your best option to payoff unsecured credit card debt, while maintaining future credit opportunity without the public embarrassment of bankruptcy or its long lasting marks.

    Also there are some debt settlement companies that will not require you to put thousands of dollars down. I suggest you look for one who will tell you all the bad stuff and true upfront costs before you go down the wrong road with a bad debt settlement actor promising you pie in the sky.

    Good luck!

    Ryan Ortega
    Certified Debt Specialist @ Common Cents Credit Solutions
    .-= Ryan Ortega´s last blog ..Top 3 mistakes consumers make in a debt settlement program. =-.

    • Ryan,

      You posted a good comment for a friendly debate.

      As someone that went bankrupt, I’m a bit confused by your statement about “…the public embarrassment of bankruptcy or its long lasting marks.”

      You can recover from bankruptcy in less time than it takes to recover from debt settlement and I’m uncertain if you are suggesting that the appropriate path to get out of debt should be determined by an emotional reaction to how you might think you might feel from going bankrupt, I think that would be a mistake.

      Sure, debt settlement is an option but if I was someone that did not have the resources at hand to settle my debts right now with a lump-sum settlement I would bet you that a person going bankrupt today would be able to purchase a home, a car, and get unsecured credit faster than a person that began saving monthly payments towards debt settlement starting today.

      Nearly the day after bankruptcy, people will start to get offers for credit again. The credit report can be brought back to life within a year by following some very easy commonsense rules, and in fact if someone is behind on their bills right now, bankruptcy can actually increase the credit score. I know it all sounds crazy, but it is true.

      For someone that has assets at risk in bankruptcy, other options should be evaluated but it would be a mistake to say that simply because your liabilities exceed your assets that you would not have to pay any income tax.

      It is true that a consumer could make a claim that they do not have to pay the tax due to forgiven debt by filing IRS form 982 and claiming they were insolvent. “However, the exclusion applies only up to the amount by which consumers are insolvent. That means if $5,000 in debts were forgiven and liabilities exceeded assets by $2,000, then the $2,000 would be excluded as income. “The remaining $3,000 would be reported under other income,” says H&R Block’s Flores.” Source Or as the IRS likes to say in attempted plain english “In the case of a title 11 case or insolvency (except when an election under section 108(b)(5) is made), the reduction in basis is limited to the aggregate of the basis of your property immediately after the discharge over the aggregate of your liabilities immediately after the discharge.”



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