"CREDIT COUNSELLING" IS ALSO SOMETIMES
CALLED A "DEBT MANAGEMENT PROGRAM"
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"Credit counselling" services sell people in debt, a debt consolidation program for which they charge fees either directly or indirectly or both. They may say they are non profit but they make a lot of money from servicing you.
There have been cases of outright fraud by credit counsellors who stole the money debtors paid them which was supposed to be sent to the creditors.
The fees vary based on the services offered. It may be a fixed fee, an hourly rate, a percentage of the payments made, or a combination of all three.
Contact the organizations offering these services to find out how much they charge.
Ask them to mail you a fee schedule.
Before signing a contract, make sure it includes all the services discussed and the exact costs you will have to pay. If they are evasive find another service.
It is always a good idea to get a quote from more than one service before making your decision. It will not affect your credit score to shop around for credit counselling services.
By using a credit counselling service, you authorize them to negotiate with your creditors in order to make arrangements regarding your payments.
In most cases, you will have to make one regular payment to your counsellor, who will look after dividing the agreed upon amounts among your creditors.
Buried in each of your monthly payments is a fee or commission for the credit counseling service. They are not free regardless of what they claim. They make a lot of money from this service.
Your budget determine which creditors you want the credit counselling service to contact on your behalf.
Bankruptcy, may well permit you to recover a good credit rating much faster than credit "counselling".
Negative credit items remain on your credit report for to seven years. This would include the records of your credit "counselling" and a list of your "bad debts."
Bankruptcy will also remain on your record for up to seven years, but you may well be able to re-establish credit after a couple years. Think about that.
"Credit counselling" is a tool for people in financial trouble, but it should be used with caution.
Be skeptical. These services make their living by selling you their program and they only have one program to sell, so for them, one size fits all.
Their "counselling" is not "counselling". It is a slick sales pitch aimed at enticing people to sign up for their debt consolidation service. That is their bread and butter.
Credit counsellors offer a form of debt consolidation and nothing else. They cannot offer you a bankruptcy or a consumer proposal plan. Only Trustees in Bankruptcy can do that.
They are not licensed. Anyone can call herself a credit counsellor. There is no skills test or requirement.
They are not a government run service. They are not a "charitable" free service. You will pay them for their services. While they assert they are non profit, that is really meaningless and misleading. Their owners do very well for themselves.
Any company can be non profit. by paying the owners a huge income. All "profit" gets spent as salary or some other scheme so there is no profit showing on the books.
No profit means no income tax to pay.
Credit card companies and banks often pay these outfits a commission based on your debt and payments.
As an alternative to a consumer proposal and or bankruptcy, credit "counselling" has some merit. But know you are not getting any free ride.
A typical credit "counselling" debt repayment program may well run for many years.
Consider that an alternative, bankruptcy, may well permit you to recover a good credit rating much faster than credit "counselling".
Bankrupts are usually discharged and can begin to acquire credit and a decent credit rating in less than a year
Credit "counselling" plans remain on your credit report for seven years. This would include the records of your credit "counselling" and a list of your "bad debts."
Bankruptcy will also remain on your record for up to seven years, but the recovery is very rapid.
This is not legal advice, it is information
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