• 04
  • October
    2011

While not for everybody, credit counseling can be a viable alternative to filing for bankruptcy. In credit counseling, indebted consumers receive education about avoiding debt and establish a debt management plan which allows them to pay off their debt over a period of time. These plans typically involve reduced payments, fees and interest rates negotiated by the credit counseling agency.

Though discipline is needed, consumers can be successful with such programs. For instance, a Michigan couple-Jerry and Sue Bailey-was recently awarded by the National Foundation for Credit Counseling for their success in paying off $92,000 of credit card debt over 5 ½ years through a credit counseling program.

According to sources, the Bailey's debt was largely accumulated between 1992 and 2005, when numerous expenses piled up on 17 credit cards. Over time, creditors were haunting the Bailey's.

In 2005 the couple went to a credit union and they were told they should file for bankruptcy, but they decided to go to a credit counseling agency instead. The particular agency they went to was GreenPath Debt Solutions. The agency worked with the couple on finding ways to increase their income, decrease their expenses, and balance their budget.

When a consumer goes on a debt repayment plan, they will make their monthly payments to the credit counseling agency, which will then directly pay the creditors every month. These agencies help consumers negotiate for reduced interest rates and monthly payments.

Credit counseling is not for every consumer. It does take discipline and integrity to complete these programs. For some consumers, bankruptcy will be a better fit.

Source: Fox Business, "Michigan Couple Honored for Paying off $92,000 Credit Card Debt," Connie Prater, Sep 28, 2011.