UNDERSTAND YOUR OPTIONS

If you are dealing with overwhelming debt, and are considering signing up with Consumer Credit Counseling Services (CCCS) OR considering bankruptcy due to the uncertainty of escalating collection accounts, DON’T and call us first.

Because regardless of how attractive their respective options may sound, the truth is that either recourse will have the same long-lasting, devastating impact on your credit history and scores.

Consumer Credit Counseling Services (CCCS) – Beware!

For starters, due to how the CCCS debt management program (DMP) is constituted, it is only helpful for some consumers. The reason is that since the Creditors dictate what concessions are offered through DMPs, they’ll lower the interest rate but never the amount of principal that consumers owe. 

Hence, if consumers cannot significantly lower the amount they owe due to insufficient funds, they often fail to complete an amortized three to five-year DMP. And, if one defaults on the outstanding balance while in a long-term program, they can still be sued for the remaining balance, ultimately giving the creditor rights to garnish their wages or attach a lien to the debtor’s home.

With that in mind, based on the available data provided by the National Foundation for Credit Counseling, roughly 26 percent of enrolls complete a DMP, equating to only consumers with considerable disposable income at the end of each month being the ones able to get through DMPs.

And, if you default on the outstanding balance while in a long-term program, you could still be sued for the remaining balance, ultimately giving the creditor rights to garnish your wages or attach a lien to your home.

Moreover, a CCCS repayment program can have the same disastrous consequences, plus a long-lasting impact on your credit reports, as a bankruptcy filing. Because once CCCS has “set up” an account, the furnisher of information will add a referencing comment to the items in your credit report, which are being repaid through the debt management plan (DMP). So, even though this practice won’twon’t directly affect your credit scores, it is a major red flag to potential lenders, stating that you cannot responsibly govern your finances and need outside intervention to manage them for you.

Additionally, on their website, the claim is made that while in their program, there’s “no direct effect on credit scores,” which is untrue. The reason is to prevent you from using the accounts that are being repaid through the DMP, and you will be required to close the credit lines. This action, in turn, will affect the length of your credit history (which accounts for approximately 15 percent of your FICO score). Thus, if the length of credit on an account being closed is one of your oldest, the result of doing so will negatively impact the age of your credit history for years to come.

Bankruptcy – Make It Your VERY Last Option!

Despite the advice, you find online or hear from a co-worker, family member, or friend, whatever you do, only discharge your debts through bankruptcy if you thoroughly review ALL your options.

Moreover, Attorneys may advise this alternative because they will be compensated upon completion, for services rendered. Yet, if someone you know that has filed, tells you after a year banks will give you credit cards, and a mortgage, beware.

Forasmuch, the truth is the repercussions will be severe!

Moreover, Attorneys may advise this alternative because they will be compensated upon completion for services rendered. Yet, beware if someone you know has filed and tells you that after a year, banks will give you credit cards and a mortgage. 

Forasmuch, the truth is the repercussions will be severe!

CHAPTER 7 Vs. CHAPTER 13 BANKRUPTCY

In short, a Chapter 7 bankruptcy allows a consumer to liquidate all of their debt and is generally meant for people with limited incomes, who cannot have the ability to pay back all, or some portion of their obligations.

Conversely, under a Chapter 13 bankruptcy, also referred to as a wage earner’s plan, a filer has to repay at least some of their debt, usually monthly, to the bankruptcy trustee; which is an official appointed by the bankruptcy court to oversee your case.

Hence, pre-2005 bankruptcy rules, most filers could choose the type of bankruptcy best for them. And, taking the easiest route most chose to eliminate their debt through Chapter 7 bankruptcy.

Yet, in 2005, Congress overhauled the bankruptcy laws, making it harder for some people to file for insolvency.

Thus, the law passed in 2005 prohibits most people with a job from using Chapter 7 bankruptcy. This means that many filers have to repay, if not a portion of all, at least some of their debt via a chapter 13 bankruptcy.

While a chapter 7 or 13 bankruptcy will allow you to discharge all or a portion of your debts, either option comes with a very high price. To begin with, you’ll find it very difficult to get new credit in the future. Hence, if you apply for a new credit card or loan within two to three years after bankruptcy, your application will either be declined, or you will be penalized with a highly high-interest rate and minimal credit limits, as potential lenders will still see you as a significant risk

Additionally, since the action can report on your credit files for 7-10 years, you may be required to pay higher automobile insurance premiums and, without putting a substantial amount down, could be nixed from renting a decent apartment or house. Notwithstanding, buying a home could be totally out of the question for at least three years. Even though FHA will accept a 640 score, many banks and federal lending institutions are again starting to adhere to more stringent underwriting and credit score guidelines, as they did post the 2008 financial crisis. Regardless, discharging one’s debt via bankruptcy gives a creditor one more effortless reason to deny someone a loan.