About 60 percent of those who sign up for credit counseling drop out before completing the program and a significant number of drop-outs go on to file bankruptcy. Many debtors find the four year program to be too rigid and difficult to stick with, and those who stay with it and complete it find that they have no extra money each month. In other words, they're basically living paycheck to paycheck while most of there income is sent to pay creditors. It's not a fun way to live for four years, particularly, when one considers that most of the debt can be wiped out in a few months by filing a chapter 7 bankruptcy.
--Although the ads for credit counseling services promise that your monthly bills will be lower, this isn't always true. Some people find their bills actually increase each month or decrease by as little as $10.00! The ads also don't tell you that not all of your creditors are willing to participate. More and more creditors, particularly the big credit card companies, are raising their standards for acceptance while lowering the fees they pay to credit counseling services. In fact, one of the "Big 10" credit card companies now requires all debtors to prove that they are in financial difficulty before accepting them into a new payment program. Another of the Big 10 credit card companies will actually raise your interest rate when you sign up for a credit counseling program.
--There are too many dishonest credit counseling services in operation. Knowing that 60 percent of their clients will drop out of the program, they try to collect as much as they can upfront from debtors. Watch out for hidden fees written in the contract that allow the counseling service to keep all or most of the payments you make during the first few months as their fee. These agencies don't care about helping you get out of debt; they only want to collect $200 or $300 from you as quickly as possible knowing there is a good chance you will drop out soon.
It then becomes a question of ethics and principles. Chapter 7 is the quick out and in some ways the easy out. But what does one do or who do you turn to when you want to try to make right your mistakes ? You have yourself, a counseling agency or at the least a settlement company. Trying to fix it your self can be very difficult if you are unarmed or unprepared to play in the big leagues.
