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Pew Law Center Blog
May 19, 2016 Lawrence 'D' Pew

7 Secrets Credit Counseling Companies Don’t Want You To Know

1.  Credit counseling agencies are not on your side.  They actually work on behalf of the credit card companies to squeeze as much money out of you as possible. Some of these firms have even been shut down by federal government because it turned out they were owned by credit card companies.

2.  These firms have zero special power.  Banks and credit card companies have no legal reason to listen to them.   All the counseling outfits do is try to negotiate.  You can do the exact same thing… without paying the big fee.  These firms have no leverage, and no proven negotiating strategies.

3.  The “stop making payments” tactic that these companies order you to use can be extremely risky.  It can easily make a bad situation worse.  When you stop making payments on your car, chances are pretty good it will be repossessed before you build up enough cash reserves to try and negotiate a lower amount.

4.  It’s not unusual for these companies to dump a tax nightmare on you.  Let’s say you owe $20,000 on your credit card and the company settles for $5,000.  You’ll get a 1099 income form from the IRS, which means you have to pay taxes on the $15,000 amount that’s forgiven.

That’s right… the money you “save” is actually taxable income, and all of a sudden, you’ve got a tax bill.

(When you file bankruptcy with an attorney, this kind of thing doesn’t happen.  You don’t owe taxes on the amount of debt that’s forgiven.)

5.  Debt settlement firms and credit counseling agencies are expensive.  You can expect to pay three, even ten times as much as using an attorney to file for bankruptcy.  And you get none of the benefits of legal representation.

6.  The phone calls and the letters from creditors don’t stop.  You get zero legal protection.  You can still lose your car, your home, and you can still be sued by the credit card companies for not paying your bills.

7.  The problem drags on and on.  Most debt settlement companies usually take a long time to have any kind of an effect at all.  We work with clients who have come to us from credit counseling companies.  They tell us that even after being with a firm for two years, they still get phone calls from creditors.  What started off as a small problem grew into a big problem… and turned out to be a lot more expensive.

The Exception to The Rule

There are few good companies out there that can actually help people.  But they are few and far between.  Your safest move is to avoid these expensive predators.

You’re better off when you have an experienced lawyer on your side, fighting on your behalf.  If you would like to come in and meet with our bankruptcy lawyers, we’ll review your situation and  show you your options.

If you qualify for debt settlement, Chapter 13 would be better for you than using one of these agencies, because it’s legally guaranteed debt relief.

Within three to five years you will be completely out of debt.  You won’t be sitting on a ticking time bomb from the IRS.  You won’t be bothered by creditors calling you.

And you won’t be pressured into making a huge up-front payment.

Why not give us a call and schedule your free, no-obligation review? Our number is 480-478-1577. Or you can schedule one online.

Call (480) 745-1770 or fill out our contact form to get help from compassionate professionals. Stop worry and get help today.