Credit Counseling

If you are faced with seemingly suffocating debt, little income, and depressed to the point where you are considering bankruptcy, you may want to first try credit counseling.

In fact, if your financial situation is in really dire straits, you should probably make an appointment to talk to both a credit counselor (from a reputable credit counseling service) as well as with a bankruptcy lawyer. The reasoning is that credit counseling, while it can do wonders for some families, does not work for everyone. And, it is always best to have a backup plan in case your first plan doesn't work.

According to the National Federation of Credit Counseling, although millions of people use accredited credit counseling services each year, these services have actually only helped about a million or so get their financial lives back in order..

It helps to look at things from the creditors viewpoint. Most are not vindictive, even though it may sometimes seem that way. But they do want the money back that you, presumably in good faith, promised to pay them. And, if you are in dire financial straits, many are willing to give you a break - to a point. Sometimes, the real benefit of a credit counseling service is that it can help you to put together a viable debt management plan and help you work with your creditors to work out a way for you to have time and flexibility to pay your loan. Options may involve decreasing the interest rate, adjusting your payment schedule, or other options which you may have never though of on your own.

As mentioned, normally credit counselors don't actually help you to write off parts of your loan. They simply help you to work out a plan to pay for it.

On the other hand, financial planners working in debt management operations or debt negotiation operations do offer to help negotiate lower interest, more time, and better payback terms with your creditors. But, be aware that if you sign up for one of these services, it can actually make your life more difficult. In addition, the bad ones can leave you without far less money than you started with.

Debt management programs also have a relative high dropout rate. That's because many times the consumer will feel backed into a corner and they end up agreeing to terms that they can't realistically meet - putting them back into the same bad financial condition they were in prior to signing up for the service - but with less money.

Of course, if you have the ability to map out your own financial recovery plan, and stick to it, you could very well get by without the aid of a credit counseling service. After all, there is nothing that they do that you couldn't do yourself. The main advantage of a credit counseling services is with those that don't have much self motivation. In these cases, the service will motivates you to do things that you wouldn't normally do on your own.

Credit Card Discharge
A credit card discharge is when a credit card company discharges the balance on your credit card in return for a lump sum payment.

Debt Judgement
A debt judgement is when a creditor sues you for a disputed unpaid debt and wins the case. The court then orders you to pay the disputed amount.