The Wisdom of Using a Non-Profit Debt Counseling Firm
Read this tip to make your life smarter, better, faster and wiser. LifeTips is the place to go when you need to know about Bankruptcy Alternatives and other Bankruptcy topics.
Should I Use a Non-Profit Debt Counseling Firm?
Understanding what non-profit debt counseling firms are and are not is the key to the wisdom of using them as an alternative to bankruptcy. These firms are not
- Operated by or for the state or federal government to help people;
- Funded by government or private grants to offer this service;
- Necessarily experts at all form of debt. If you are
facing a pre-foreclosure issue regarding your home, do not seek an unsecured credit related firm;
- Really providing their services for free. While they may not charge you, be aware they are probably generating excellent income.
Many debt/credit counseling firms are
- Non-profit because they filed appropriate documents with the Internal Revenue Service to qualify as a “503C” entity. They still may
be earning superior income and giving large monthly, quarterly or annual bonuses to their officers and Board members, then legally ending their tax year with no profit.
- Earning large fees from creditors. There is no evidence that legitimate credit counseling firms operate with a “creditor prejudice” but this is something you must at least understand.
- Normally not going to make agreements to
settle debts at less than full balance payoff for you. Most will attempt to make arrangements for lower payments and/or longer terms, but you will still have to pay off 100% of your outstanding balance.
Remember, this choice is sometimes a wonderful alternative to bankruptcy. However, do not be tempted to agree to a payment plan that provides a short term solution to a long term problem and never make any agreements you know you cannot meet. Do your homework and select only an experienced and reputable firm to work on your behalf.