Similarities of Credit Card Counseling and Chapter 13 Bankruptcy Debt Relief

Many consumers who are considering debt settlement, also known as debt negotiation, as a debt relief option also find themselves deliberating over the merits of Chapter 13 bankruptcy and credit counseling. During the course of their deliberations, many realize that the general concept behind Chapter 13 bankruptcy and credit counseling are very similar. After all, the general idea is paying your creditors back in full with third-party help under adjusted terms. Moreover, many mortgage lenders insist that any evidence of third party debt relief on your credit report, which is inevitable if you are enrolled in a credit counseling program, is interpreted as a black mark equivalent to that left by Chapter 13 bankruptcy.

The similarities of credit counseling to Chapter 13 bankruptcy do not end there. Here are some other important ways that credit counseling help mirrors Chapter 13 bankruptcy:

-Both help debtors develop a budget based on their income and expenses.

-Both ask debtors to make one monthly payment to a third party---the debt relief company in the case of credit counseling, a court-appointed trustee in the case of bankruptcy.

-Both charge fees. In the case of credit counseling, the up front fee varies based on how many creditors you owe and what state you live in. Bankruptcy requires filing fees and in most cases attorney’s fees. The court trustee may also charge a fee.

-Both last for at least 3 years, probably longer.

-Grounds for dismissal are as little as one missed payment during the course of the plan.