Expert: Regan Shinski - 10/28/2010

Question
QUESTION:  What organization do you recommend for counseling on credit card debt to hopefully lower interest and minimum payment amounts? Do I want a non-profit company? I live in the Kansas City Missouri area.Thank you.

ANSWER: Hi Jane:

I own a credit repair company - we are paid to remove negative information from consumer's credit files.  For this reason, I can tell you I do NOT recommend ANY counseling company.  I can't tell you how many of my clients have come to me to repair the mess the "credit counseling" companies have created.

The industry is wrought with fraud with some of the worst experiences possible in some cases.  Even though many may be in business for legitimate reasons and attempt to help people, there is no guarantee, no improved credit, and they do nothing you can't do for yourself.

The reality, is that creditors do not like to work with these companies and the reason makes sense.  They (the credit counseling company) has to get paid somehow, right?  This is money that either comes from you directly or as a percentage or amount from the credit card company.  The bottom line is this process adds another company that has to get their share and the credit card companies know that money comes from somewhere.  Therefore what is the credit card companies incentive to work with these companies?  There isn't much and this is why most efforts by these companies - even the honest and sincere ones - often do not work.

Additionally, they do nothing to protect or even address your credit during the process.  In worst cases, they take you money and do NOTHING, leaving you with higher bills, destroyed credit, lawsuits, and less money.

Sorry, you are free to obviously do your own research but (aside from confidentiality of my clients) I could put you in touch with dozens of people who have been messed over by these companies.

Your better options are to negotiate yourself, use the credit repair process to reduce debts and improve credit, or selectively let accounts go to address debt reduction.  in the worst case scenarios, even bankruptcy is preferred to the messes left behind.

Good luck, I'm sorry.  I wish I had a more positive outlook for you on these companies but I just don't.

Regan
www.ficofighter.com

---------- FOLLOW-UP ----------

QUESTION: Would you please explain what is meant by "selectively let accounts go to address debt reduction" ?  Thank you.

Answer
This is a tactic where you selectively do not pay one or debts.  Let's examine options for a debtor that has 10 accounts and cannot pay all each month:

1.)  You could file bankruptcy.  It discharges the debts but completely destroys your credit for 10 years, keeps you from getting certain jobs or promotions, and gives a very negative stigma.  It also costs up to $3,000 to pay an attorney.  You also must meet qualification criteria to file chapter 7.  All accounts stay on your credit reports as "included in bankruptcy."

2.)  You could just stop paying all of them at once.  This will provide better monthly cash flow but dealing with all the collection activity is VERY stressful.  Odds are that some will file lawsuits against you.  You will also have 10 charged off accounts and likely 10 or more additional collection accounts AND 1 or more judgements added to your credit which effectively destroys it for 7 years without credit repair. The judgements could enable the creditor to garnish wages, place liens on property, attack bank accounts and even cease person property for sale at auction.

3.)  You could selectively stop paying one or two accounts.  As the collection activity progresses through each account, you use delay, credit repair, counter-suits, and settling tactics to try and keep your credit fairly clean and avoid a judgement.  If one account gets to the point of a lawsuit you fear you will lose, you pay or settle it with the money you have saved by not paying all bills.  The reality is that one or more of the accounts will just charge off or go to collection and nothing else.  This is better credit-wise and enables you to save money and/or pay off the other debts earlier.  Credit repair is easier as there are less accounts to deal with.  Bankruptcy is still an option if this path becomes too burdensome.  The main thing is to avoid the judgement at all costs.

Obviously, I was talking about option 3 above in my previous post but I elaborated to give you other options and ramifications of each.

Good luck, I hope this helps.

Regan

FIX BAD CREDIT - www.ficofighter.com