Credit Counseling vs. Bankruptcy

If you’re looking at filing bankruptcy, chances are you’ve already considered and ruled out credit counseling. After all, completing a credit counseling course is now required fare for potential bankruptcy candidates under the Bankruptcy Abuse and Consumer Protection act of 2005. The counseling course can be done online, over the telephone, or in person, but must be completed before filing. However, the suggestions provided by credit counselors are often overrated. 

Credit counseling and consolidating is actually funded by creditors and is no more than an alternative means of collecting on debt.  While it may help you reduce your interest rate slightly, your credit is still going to be negatively impacted. The reflection of credit counseling on your credit report will likely have the same type of negative consequences as if you had just filed for bankruptcy.

In addition to hurting your credit rating, you’re still going to have to pay back sizable monthly payments and spend a considerable amount of time living on a sub-standard monthly budget.  Many people who consolidate debt find it hard to make these payments and end up filing bankruptcy in the end.  So if you are thinking about consumer credit counseling, it might be a good idea to talk to a bankruptcy attorney first and weigh your options.