The banks have spent millions of dollars on lobbyists and were able to get Congress to pass a law that everyone who wants to file bankruptcy must first complete a briefing (counseling session) with a consumer credit counselor. If the idea was to steer people into debt management plans, then the new law hasn’t worked out well for the bankers. Almost no one who completes the pre-bankruptcy briefing goes on to enter into a debt management plan. However, the counseling session is not all bad news. Many people do feel that they received useful information on budgeting and saving money from the counseling session.
Discover the Difference Between Debt Management Plans and Filing Bankruptcy
Credit counseling companies were originally created by the banks to collect debts for them. They offer “debt management plans” where by people can consolidate their debts and pay them off in full over a period of five years. They try to negotiate lower interest rates for the credit cards so that they can be paid off over a reasonable period of time.
Even though they may be able to reduce the interest rates on some credit cards, the monthly payment under a debt management plan is usually larger than the combined minimum payments on all of a person’s credit cards. For this reason, debt management plans are not feasible for most people who are struggling financially. They offer budgeting advice that can sometimes be useful. However, the advice is frequently to get a second job (i.e., work yourself to death). It is very difficult to get credit while you are in a debt management plan. One couple who paid into a debt management plan came to see Minnesota bankruptcy attorney Greg Wald after they made payments under the plan for two years. They wanted to buy a house, but the mortgage company told them they could not have a mortgage because they were still in a debt management plan. The mortgage company told them it was too bad they didn’t just file a bankruptcy instead. The FHA will qualify people for mortgages two years after they complete a bankruptcy case. They realized at that point that they made a big mistake and eliminated their debt immediately with a Chapter 7 bankruptcy.
Avoid a “BIG” mistake! Contact Minnesota bankruptcy attorney Gregory Wald at (952) 921-5802 or visit them on the web at bankruptcyminn.com. Discover the difference between “debt management plans” and filing bankruptcy before it’s too late.