News

Keep informed and educated about the credit counseling industry, credit and money management issues.  In this section you'll find articles on a variety of topics.  Just click on the title to get to the article.  Remember to check back often for new information.

   Do you know someone with credit problems who is considering debt settlement?  There are many companies advertising debt settlement services, and it’s very important to fully understand what it is and how it compares to a debt management plan.

   Debt settlement may be an appropriate solution for individuals with high debt and considering bankruptcy. The creditor agrees to cancel part of the debt and accept the remaining sum as full repayment.  Typically, the creditor will report to the credit bureaus that the debt has been “Settled for less than full amount”, “Paid” or “Settled.”

 

   If you are unable to make your payments due to a financial hardship, and the creditor hasn’t been able to collect the debt, you may be able to work out a settlement arrangement with your creditors on your own. 

   If creditors won’t work with you, there are third party firms, typically for-profit entities, which offer debt settlement services.

   If you use a third-party firm, you will be required to make monthly payments that will be put into a fund from which your settlements are paid once a set amount has accumulated. The third-party will not make monthly payments to your creditors, and your nonpayment will likely be reported to the credit bureaus and negatively impact your credit record. Or, creditors may choose to pursue legal action against you.

   If you work out a settlement agreement on your own with creditors, this may not be an issue.

   There could also be tax consequences. The IRS considers the canceled portion of the debt as taxable income.  There is a very good chance that you will have to pay income tax on the settled amount.

   You could incur significant fees when using a third-party to settle your debt including a non-refundable retainer fee, a monthly service fee, a credit report fee, and/or a negotiated settlement fee that is paid each time a settlement amount is paid to a creditor.  This fee is paid for each creditor you have and could quickly add up to hundreds or thousands of dollars.

   Utilizing debt settlement may also require you to give power of attorney to a third party.

  Before signing any contract, it is extremely important to carefully read and understand all of the paperwork.

 

   A Debt Management Program is very different than debt settlement.  Credit counselors may devise a DMP in cooperation with your creditors.  Under this arrangement you send a monthly payment to the credit counseling agency, which is then paid monthly to your creditors.  With a DMP, the total amount owed to creditors is repaid, enabling individuals to reestablish credit with a clean slate.

   Most participating creditors will stop collection calls and waive over-limit and late fees.

Another incentive is that many creditors agree to reduce your interest rates.   By lowering the interest rate, more funds will go towards paying off the principal instead of interest charges.  The result of this is paying off your debt sooner than if you were paying on your own.

   Most credit counseling agencies are non-profit and may charge a nominal fee to help offset the cost of maintaining your account.

 

   When faced with debt and financial questions, credit counseling is a good first step. Certified credit counselors work with you to show you your overall financial picture, create a personalized budget and make practical suggestions to help you improve your money management habits and get back in control of your finances. The financial education credit counselors offer can help you determine if debt settlement or a DMP is the best option for you.   

 

  

 

   Advantage Credit Counseling Service, formerly known as Consumer Credit Counseling Services of Western Pennsylvania, has been helping people get rid of their “debt monkey” since 1968 by educating them on matters of personal finance management, budgeting and credit management.

   The non-profit 501(c)3 agency is accredited by the Council on Accreditation (COA) and holds membership with the Better Business Bureau. Advantage has been designated as a certified comprehensive housing counseling agency by the U.S. Department of Housing and Urban Development (HUD). Advantage is also a member of the National Foundation for Credit Counseling, the umbrella association for over 115 credit counseling agencies nation-wide that promotes the highest member standards for credit counseling.

For confidential credit counseling, get started
with our free no-obligation online intake form.

Click to Get Started>>

Get Free Immediate
Debt Counseling!

· Avoid Bankruptcy · Reduce High   Interest Rates · Stop Harassing   Creditor Calls

Call 866-699-2227 >>