Not all creditors will work with credit counselors, so it also might not address all your debt problems. I see many people who still have to file for bankruptcy after paying for months/years, and after paying thousands of dollars to creditors through a DMP because they aren't able to finish paying the plan, or because creditors who wouldn't agree to the credit counseling plan continue with collection activities and lawsuits.

In my bankruptcy consultations, I may recommend that someone speak to a reputable credit counselor that offers a DMP if I think it might be appropriate. I like clients being able to compare the different approaches. If I don't feel bankruptcy is a good option, I always say so, and all good bankruptcy attorneys will do the same. However if people are struggling and can repay some of their debts, Chapter 13 bankruptcy is often a better alternative to credit counseling because as long as the bankruptcy laws are followed, creditors don't have to agree to anything. The law forces them to accept what bankruptcy law gives them. Chapter 13 bankruptcy plans may pay 100% of the debts, but depending on the circumstances it also has the ability to lower what is paid to creditors if the client can't afford to pay in full. Interest rates are set by the Court so they aren't tied to what the creditor has been charging. Additionally, if something goes wrong a few years into the plan, Chapter 13 allows changes and forgives mishaps better than a DMP. Many DMP agreements end if you fall behind.

The problem that I have with many credit counselors is that their focus is on the debt, and not the client. They come up with a a number to pay towards the debts, but they don't always carefully consider the person's true ability to pay. If they review a budget, they often take a client's word on spending habits without any further investigation of the true needs or spending habits of the client. It isn't that the clients lie, but most people are not really aware of how much the truly spend. That is often part of the problem. You have to factor in expenses that don't come up every month, such as car or house repairs, medical and dental needs, once a year tax payments, clothing, or other seasonal expenses. Many clients never think about these expenses, or it might have been so long since they have been able to repair something or buy new clothes that they don't factor it in..

Additionally, not all representatives who work for the credit counseling companies are qualified to really give financial advice. They may have only received training by the company that they work for to apply the credit counseling products that the company manages.

My focus is always on the client first, and the debt second. After twenty years of work in the field of bankruptcy, I know that the heart of every client's case is their budget. I always start with the client's income and expenses to see if they can live on what they make. Then I see if there is anything left to pay towards the debt. If there is, then I look to see whether there is enough to cover the debt payments to pay off the debt in a reasonable amount of time. I review the client's budget, and see if there are any suggestions I can make to rework the budget to free up income to pay the debts. .

If you choose to speak to someone offering "credit counseling," make sure that it is someone who has your best interests in mind. If you wish to explore an alternative to bankruptcy try your local Consumer Credit Counseling Service (CCCS); often a service of United Way. The only credit counseling agency that offers a DMP that I am currently recommending is my local local Consumer Credit Counseling Service; in Charlotte, Monroe, Gastonia, and Concord offices. I know the individuals and the director and know that they are not an agency that tries to sign up people into a DMP just to get a commission. They also meet with clients in person to review debts, budgets and they create a spending plan to see if the DMP will be feasible.

You should beware of "counseling" companies, especially if you find them on the Internet. There are many companies advertising credit counseling services that they may do you more harm than good. Many have been, or are, being sued or investigated for problems with their programs, fees, or non-profit status. If you choose to speak to a credit counselor, be careful you are with a reputable company that provides good results.

You should make sure that you understand all of the fees charged for their program, and be aware that enrolling in a credit counseling program can negatively affect your credit rating Sometimes, charge fees that aren't fully explained. Some charge fees that are paid up front before they even attempt to work out a plan. They might set up a monthly payment plan for you but not work with you to make sure that your budge will allow you to make the required payments without falling behind on other expenses, especially your house or car payments.

The goal of credit counseling is to pay off debts. It isn't to protect the individual from their creditors, to protect people's retirement accounts or homes, or even have them live on a balanced budget with emergency savings. Creditors who agree to work with a debt management program may lower interest rates or payments, but the payment balance may not change, or it may even increase if they are just stretching out the payments but not reducing interest or balances.

Credit counseling works best for people with the ability to pay their debts in full, or at least a great portion of the debt amount. You must be able to pay the credit counseling payment without falling behind on your regular living expenses such as your house and car payments for this to be a really good option. Credit counseling is an option to help you pay your debts if you are able. The true ability to repay is often overlooked by many companies offering debt management plans.

If you speak to a credit counseling agency, make sure that they look at your overall situation, and that they consider whether or not your budget will take care of your family's needs - in addition to the payment to the agency for your debts. Some agencies only look at the debt payment and pay little or no attention to your actual ability to pay your other living expenses after making the payment to them.

People who aren't lawyers can not give legal advice at all. This limits what credit counselors can say. Lawyers can give legal advice so speaking to an attorney allows you to look at different alternatives, including bankruptcy, non-bankruptcy legal solutions, and options like credit counseling. Non-attorneys are not allowed to give you legal advise, so there are things you won't learn if you don't speak to a lawyer.. Lawyers can discuss all options and explain legal issues including credit counseling .

Also when a credit counselor that offers you a DMP, they may also have a vested interest (a commission) based upon getting you to sign up for their program and make a few payments, even if they know you won't be able to complete the program.