For Many, Credit Counseling Does Not Deliver on Promises
We've all seen the ads on television from credit counseling firms about how debt consolidation can reduce your credit card debt to pennies on the dollar. But do credit counseling firms really deliver on these promises?
At the law firm of Michael M. Malinowski PLC in Grand Rapids, Michigan, I offer a free initial consultation to answer your questions about credit counseling and debt consolidation. I am a lawyer with 25 years of experience representing debtors in western Michigan.
I may be biased, but I don't favor debt consolidation for a number of reasons:
- Credit counseling firms expect an up-front fee based on a percentage of your debt, then a $30 to $50 per month maintenance fee. Unless you have a relative who will pay the up-front fee, you will only go into further debt by paying the credit counseling firm.
- It can take four to five years of payments before you get out of debt. If you file Chapter 7 bankruptcy, you can be out of debt in four to five months.
- Many creditors are not willing to negotiate debts. All it takes is one of your creditors to file a lawsuit or start a garnishment, and your debt consolidation plan will fall apart. Even if your plan falls apart, the credit counseling firm won't refund its up-front fee.
- In a debt consolidation plan, you don't have the protection of federal bankruptcy laws against creditor harassment, repossessions, garnishments and lawsuit judgments.
- Some so-called credit counseling firms were started by a consortium of credit card companies. This leads me to question if they really have the consumer's best interests in mind.
You should never use money from your 401(k) plan or the cash value of life insurance policies to pay debts. Those assets are protected when you file bankruptcy.
Only bankruptcy offers you the full protection of the federal Bankruptcy Code, and only a lawyer has a legal duty to put your best interests ahead of his or her own.
Free Bankruptcy Attorney Consultation
You don't have to live with the stress that financial problems can cause. For a free consultation about credit counseling and bankruptcy, call me, lawyer Mike Malinowski, at 888-339-6017 or fill out our contact form on this Web site. My law office is in Grand Rapids, Michigan.
