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3 reasons credit counseling may not be right for you

On Behalf of | Feb 12, 2018 | Blog |

If you are having trouble sleeping and eating because you cannot figure out how to pay your bills, you are not alone. Many people in the Dayton area find themselves in hot water over their finances due to circumstances beyond their control. Though you are good with numbers and have a history of financial responsibility, your creditors are not accommodating or understanding of your hardship.

Your friends may have suggested that you enroll in a consumer credit counseling program to improve your ability to pay your debts. However, there are many limitations to these programs.

1. Income requirements

The Better Business Bureau explains that you may be a candidate for credit counseling if you have the income to pay your debts. This long-term option assists you in paying your unsecured debts such as credit cards. It generally takes four or five years to complete a program, as long as you are able to make all your payments and do not incur new debt. Over 75 percent of people drop out of these programs, many because they cannot afford the monthly payment.

2. Type of debt

If your financial woes involve trouble making your mortgage, utility, student loan or car payments, credit counseling will not help you. These programs are designed to pay down credit cards and other unsecured loans. In some cases, you may be able to include your medical bills, but it depends.

3. Other program limitations

A counseling program may not be able to help you with your credit card bills, either, if your accounts are already delinquent. Not only that, your monthly payment on your credit card debt is not likely to be much lower than your current minimum monthly payments, if at all. The program does not change the amount you owe. The difference is that more of the money would be going to the principal rather than the high interest rates, paying down the debt more quickly.

Although credit counseling may not be the solution you were looking for, this does not mean you are without options. Many people turn to Chapter 7 or Chapter 13 bankruptcy for help with overwhelming debt. A bankruptcy attorney can help you assess your circumstances to determine whether one of these solutions suits your needs.

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