Is Credit Counseling Better Than Personal Bankruptcy?
Credit counseling (called credit counselling in Canada) is usually a two step process. First, it involves working with a credit counselor to review your budget and determine your debt management alternatives. The second step is often for the credit counselor to put you on a Debt Management Program where you make monthly payments to your credit counselor, and they distribute the money to your creditors.
It is this second part, the Debt Management Plan, that is often thought of as a a bankruptcy alternative.
Credit counseling may be preferable to a personal bankruptcy because you are not required to give up your house or other assets, and you won’t have a bankruptcy appearing on your credit report, so for those reasons credit counseling may be better than personal bankruptcy.
However, with credit counselling you are required to make monthly payments, and you are required to repay your debts in full. If you have lost your job or have a reduced income, or if your debts are too large to repay over a three to five year period, then credit counseling is not for you.
Start by making a monthly budget to see what you can afford to pay. Then, talk to a credit counselor, a licensed bankruptcy trustee if you live in Canada, or a bankruptcy attorney if you live in the United States, and after reviewing your options you can make the decision about whether credit counseling or personal bankruptcy is the correct option for you and your family.
Filed under budget,
credit counseling, personal bankruptcy, bankruptcy
Credit counseling (called credit counselling in Canada) is usually a two step process. First, it involves working with a credit counselor to review your budget and determine your debt management alternatives. The second step is often for the credit counselor to put you on a Debt Management Program where you make monthly payments to your credit counselor, and they distribute the money to your creditors.
It is this second part, the Debt Management Plan, that is often thought of as a a bankruptcy alternative.
Credit counseling may be preferable to a personal bankruptcy because you are not required to give up your house or other assets, and you won’t have a bankruptcy appearing on your credit report, so for those reasons credit counseling may be better than personal bankruptcy.
However, with credit counselling you are required to make monthly payments, and you are required to repay your debts in full. If you have lost your job or have a reduced income, or if your debts are too large to repay over a three to five year period, then credit counseling is not for you.
Start by making a monthly budget to see what you can afford to pay. Then, talk to a credit counselor, a licensed bankruptcy trustee if you live in Canada, or a bankruptcy attorney if you live in the United States, and after reviewing your options you can make the decision about whether credit counseling or personal bankruptcy is the correct option for you and your family.
Filed under budget,
credit counseling, personal bankruptcy, bankruptcy
