Credit Counseling

American Debt Foundation

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Credit Counseling

American Debt Foundation

http://www.americandebtfoundation.com

Credit Counseling

Many of these desperate consumers find themselves contemplating a bankruptcy filing, but bankruptcy can carry a legacy you
will have to live with for years. A bankruptcy filing will stay on your record for a minimum of seven years, and you may find
it difficult or impossible to obtain necessary credit in the interim.

Fortunately, there are alternatives to filing bankruptcy, even for consumers who owe thousands or even tens of thousands of
dollars to various banks, credit cards and other creditors. Many people ask whether it is best to go with a debt reduction
program or enroll in a Credit Counseling program. While there are some similarities between these two types of programs,
there are some important differences to consider as well. Let us consider the five most important differences between debt
reduction and Credit Counseling.

1. Did you know that most Credit Counseling programs will require that you close all of your credit accounts? The few
exceptions to this requirement include accounts that are required for business needs, accounts with very small balances and
accounts on which there are cosigners who are not applying for Debt Consolidation services. Debt reduction services, on the
other hand, do not require that all credit accounts be closed. This can make it much easier to keep a credit card for
emergency and convenience purposes.

2. Credit Counseling services typically take longer to complete than debt reduction services. The average length of time to
liquidate debt through a Credit Counseling service is 5 years. Unlike Debt Consolidation, debt reduction programs can often
allow consumers to retire their debts in less than a year.

3. Cost savings in the form of reduced payments is another important advantage of debt reduction programs. While credit
counseling programs typically require that the entire amount of the debt be repaid, debt reduction programs can be negotiated
to allow the consumer to repay only a portion of what is owed. Most creditors are willing to work with consumers enrolled in
debt reduction programs and that includes accepting a lower repayment amount. Settlement amounts can range anywhere from
20% to 60% of the amount owed, with the industry average being around 50%.

4. Your credit score is also affected in different ways by Debt Consolidation programs versus debt reduction programs.
Generally, credit-reporting agencies will re-age the accounts of consumers enrolled in Credit Counseling services after three
payments have been made. With a debt reduction settlement, the status of the account does not change. If the account is
current, it will remain current. If it is past due, it will remain so. It is also good to remember that with a debt
reduction agreement the creditor will report that the account has been “settled in full” or similar wording, at the
conclusion of the debt reduction program.

5. The final difference between debt reduction programs and Debt Consolidation is the bargaining power enjoyed by the consumer.
Credit Counseling programs rely on the submission of a debt repayment proposal which the creditors are free to accept or
reject as they see fit. With a debt reduction program, however, all creditors are contacted immediately to inform them of the
hardship situation and the desire to resolve it through a negotiated debt reduction agreement.

American Debt Foundation

http://www.americandebtfoundation.com