Creating Personalized Solutions

We use our skill and experience to help each client secure the best available resolution to their situation.

Credit counseling does not always result in debt relief

Many Michigan consumers turn to credit counseling in an attempt to address large volumes of outstanding debt. These companies can assist individuals by making a comprehensive assessment of existing debt levels, then working out a repayment structure that will lead to significant debt relief over a period of time. They can even work directly with lenders to negotiate lower interest rates or remove fees associated with late payments or balance overages.

However, a recent report suggests that credit counseling is not right for everyone. In fact, some consumers can find themselves still filing for personal bankruptcy after years of paying down debt and paying out high monthly fees to a credit counseling agency. There is no hard data on how many consumers begin a debt repayment program and never fully emerge from debt, but the industry is huge. The top 10 largest credit counseling agencies bring in around $400 million in annual revenue, making this big business for the agencies themselves.

In addition, even those agencies that claim to be non-profit can be misleading. At least two of the biggest non-profit credit counseling agencies have been charged by the IRS with operating as for-profit ventures under the guise of being non-profit entities. When there is money to be made, many agencies will seek to profit from consumers in serious financial straits.

When making a decision on how to address significant debt issues, it is important to fully understand the implications of each available option. While debt relief through use of a credit counseling agency is certainly possible, for some Michigan consumers it simply does not make sense to spend three to five years paying down high levels of debt that could be discharged immediately through a personal bankruptcy filing. This is especially true for individuals or families that have personal or employment issues that could leave them unable to make their monthly repayment obligations.

Source:, "Behind the Credit Counseling Curtain," Fred O. Williams, Feb. 11, 2013

No Comments

Leave a comment
Comment Information