Credit counseling v. Chapter 13 from a budgeting perspective

When families encounter financial difficulties, they explore many options before deciding what is the best course of action for them based on the information they receive. Family members, trusted friends, coworkers, and financial professionals are all sources people often look to for guidance and advice. Among the professionals people often seek out for advice are credit counselors and bankruptcy attorneys 

Credit counselors typically work for companies that get paid based on how much the debtor pays them each month to settle with their creditors. Potential clients have reported various experiences with these agencies. Some people meet with counselors in their offices, while some deal with their counselors only over the phone or only on the Internet. The information people report they are asked for is usually similar and usually basic. The main questions potential clients are asked are how much do they make, how much are their household expenses, and who do they owe money to. People going through this process report that the amount they are told they have to pay is based on how much they owe. The amount is fixed and there is no changing it later if the payment overwhelms the family. If the amount messes art to pay off all debts in full is more than the household budget shows is available, they are told to get second jobs or cut back expense. People also report that because credit counseling creditor participation is totally voluntary, if they have creditors that refuse to participate in the program, they are left on their own to deal with those creditors. Creditors are also free to continue collection action, even after agreeing to the voluntary credit counseling program. 

People report a very different experience when they consult with a professional like a bankruptcy attorney. First, bankruptcy attorneys are not paid based on the amount a client pays to their creditors. In fact, our firm does not require clients to pay attorney fees up front before the case is filed. Second, chapter 13 bankruptcy addresses all the creditors a client has, and creditors don’t have a choice on whether federal bankruptcy law applies to them. Third, and most importantly in clients’ opinions, bankruptcy attorneys approach the budgeting process from a different perspective. Consultations with our firm involve discussions about financial goals and look at how to restructure the household budget to achieve those goals. Chapter 13 plans are usually structured to pay the amount of income left after paying reasonable and necessary living expenses, which people often find to be a significant and welcome difference from having to pay all creditors in full. The amount of the payment can also be revisited by a follow up meeting with they attorney if there are significant financial changes after the case is filed. Clients find this type of tailored approach to budgeting and debt resolution works better for their families.

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