Inside Bankruptcy: AZ Credit Counseling Agencies Can Cost You

Inside Bankruptcy: AZ Credit Counseling Agencies Can Cost You

Many clients have told us their stories about how they relied on a credit counseling agency, or debt consolidation company, before seeking bankruptcy (AZ) assistance from the Pew Law Center, PLLC. For too many individuals, relying on a debt consolidation company for debt relief only made their financial problems worse. Instead of reducing their debts, people find they are paying more money to the credit counseling agency and getting little, if anything, in return.

This information is for those individuals who may be considering a credit counseling agency instead of experienced legal representation from a professional bankruptcy AZ law firm. Lawrence ‘D’ Pew discusses the problems associated with credit counseling agencies and why bankruptcy (AZ) may be a much better option. Before you decide to sign on with a credit counseling agency, understand how these organizations make their money off of you and what promises they can and cannot keep.

Credit Counseling Agencies Have No Special Authority. 

Unlike a bankruptcy law firm, a credit counseling agency has no special legal authority to negotiate with your creditors. There is no federal law requiring that your creditors negotiate with a debt counselor, any more than creditors must agree with you to reduce your debts. As your agents, debt counseling companies are restricted to acts that you could do yourself – that is, contact each of your creditors to discuss better payment terms or a reduction of your debt.

The agency agreement that you sign with a debt settlement company is an ordinary business agreement. You agree to pay and the agency agrees to try and work out a deal with your creditors. Always be mindful that you do not need to pay a premium to a debt consolidation company simply to negotiate with your creditors.

Knowing that these organizations are legally limited in how they can assist debtors, they frequently boast about their well-devised strategic approaches to negotiating debt settlement agreements. But their most well-devised strategy is actually to intercept your money before you have an opportunity to pay it to your creditors. Exercise caution in dealing with these agencies – there is no magic, and often only smoke and mirrors.