Credit Counseling

Updated on February 26, 2013
B.S. asks from Chicago, IL
6 answers

Has anyone ever used a credit counseling service? I know there's a non-profit government one and I think that's probably good, but I'd love to hear from people about who they used and if they thought it helped.

My husband's federal student loan is in default, I don't really know what to do about it. We also have some debt from 10 years ago that has been lingering over our heads. We have a good household income, and we budget, but I just don't know what route I should take in getting my husband's student loan out of default and in paying the judgement against him from another debt (the company keeps sending him settlement offers, like "Pay $2000 now and we'll cancel the other $8000 of debt" and I don't trust that those are legitimate, however, I'd like to get it taken care of before they try to garnish his wages because a 15% garnishment would really hurt us).

Has anyone used a service? Does anyone have any advice?

What can I do next?

  • Add yourAnswer own comment
  • Ask your own question Add Question
  • Join the Mamapedia community Mamapedia
  • as inappropriate
  • this with your friends

So What Happened?

Adding for informational purposes:

Student loan debt is a federal direct loan.

The judgement debt was from a credit card that sold the debt to another company, it's on his credit repot as a judgement. The company holding the debt is Asset Acceptance.

I'd like to do this on our own, I don't like the idea of giving someone else money to pay our debts, I want them paid from my checkbook with my records so I know exactly what is happening with them. I just don't really know where to start to fix these two things on my own (husband takes the approach, "ignore it and it will go away" which drives me NUTS because I am the one that has to fix it).

More Answers


answers from Salt Lake City on

I work for a debt collector and specifically am the person in charge of all credit counseling and debt settlement accounts. The advice I would give you is not to pay a settlement firm or credit counselor. It truly is a waste of money and I am so surprised at how many people DO pay to do this.
This is what you can expect a credit counselor/debt settlement firm to do:
1- Gather a list of all your debts (they would most likely have you provide a copy of all loan agreements, bills, etc. You can obviously do this on your own, for free.
2-Some will request validation of debts from creditors to make sure they are valid
3-Some will send a letter to creditors to ask that they no longer call the debtor and no longer debit your checking account
4-Then they will either send a monthly payment proposal or a one time settlement offer proposal to lenders
5- Each company is different, but either the credit counselor will have you make a monthly payment to them and then they would cut individual monthly checks to each creditor, or they will have you save funds on your own and they will present settlement offers to you and have you pay them on your own if you agree.

There is no reason to not just do this on your own and save hundreds to thousands of dollars. Also I find that so many of our customers have no idea what is going on with their account (they think the credit counselor paid it, or they are unaware of credit reporting, etc) just because a third party is doing the communicating.

Here is what I would suggest for you:
1- get a free credit report and see what debts are listed
2- Make a list of all debts including the creditor name, phone number, address, amount owed
3- If you are unsure, send a letter requesting validation of debt, they are legally required to send you a proof of debt and advise you of charges, what you have paid, current balance, etc.
4- Do your budget and find out what you can pay toward your debt
5-Contact each creditor and either propose a monthly amount you can pay or a lump settlement offer. Get settlement offers in writing.
6- Keep accurate records of what you paid.

And, yes, most creditors will accept a settlement. We would rather get something than nothing. Creditors WANT to work with debtors most of the time. Good luck.

1 mom found this helpful


answers from Seattle on

I used one to consolidate the Credit Card debt I had from turning 18 and going buck wild.

It was helpful for the simple fact I was paying one location, one lump sum. And I was not juggling 10 different monthly bills, all with different interests and amounts owed. I did not know what was coming or going.

Then when I was pregnant with my last kiddo, I was in a very bad accident. Which we eventually got a settlement for. I was able to pay everything off and be in the green. We had actually gotten in the green and was in the market to buy a house(thankfully we ended up not doing so as the bubble burst soon after we stopped looking). I credit the counseling service for making it easier to get organized.

You have to be very careful though. Some can be pretty shady.

I ended my service with them on a bad note.

I failed to read some of the fine print that stated, after I was finished up with paying down debt, they would continue to bill me the $59 monthly service fee that came out with the deductions each month.

so I had to go the rounds with them to get the service shut off and attempt to get some of the $59 back they had taken.

So read the fine print!!!

I can not for the life of me remember the name of the place I used.

I know my in laws looked it up(the were helping us figure out how to get all of this organized)and did not think they were the best choice to go with from peoples reports. When it came down to it though, they had the over all best offer for us. They will try and work with the companies you owe money to get a reduced amount sometimes....

Let's hope that congress can come up with some form of Student loan forgiveness here in the near future. All the major Corporations and banks have been bailed out.....Our turn has to come at some point. They sure as hell are not attempting to make a point to do anything about the housing crisis.

Good luck!



answers from Philadelphia on

Please use extreme levels of caution. Any one who says they can cancel your debt or who wants to have you pay them and then they will pay your bills should be treated as likely to be a scam.

Is it a federal loan or a loan through a private bank that you were steered to?? These behave differently in default so it matters!

Start by looking for the non-profit gov't credit counseling to help you clear up the "settlement" debt, deal offers are often an indicator that the debt was purchased by a third party and is actually not able to be pursued against you...... You need good advice.


answers from San Francisco on

I think you're going to be better off doing this yourself. Credit counseling can be iffy - either it can make your credit worse, or be an outright scam.

Being that there's a judgment against your husband for one of the debts, and you're receiving settlement offers on that, you may want to see a lawyer for advice on how to proceed. If they forgive the $8K, it will likely be reported as a charge-off on your credit, and you'll receive a 1099 for that amount (as in, it will be reported as your income that you will have to pay taxes on). The other thing is, if it's been a while since your husband last paid that creditor anything, paying money now will cause it to remain on his credit for the next 7 years (where, say if it's been 5 years since he last paid, judgment or not, it will fall off of his credit in 2 years - he'll still owe money against the judgment, but it won't be on his credit anymore).

So, for that you're best off talking to a lawyer - possibly the kind who deal in bankruptcies. You may not want to file bankruptcy (and in any case, bankruptcy won't affect the student loan, so you'd still have to deal with that), but bankruptcy lawyers can be helpful in negotiating with creditors and would know what to include in any kind of settlement agreement.

Or, you can do some research on line, and negotiate with the creditors yourself. Either way, I think credit counseling is pretty shady (or certainly can be).



answers from Chicago on

I would not trust a lot of those companys. Get the suzie orman book or dave ramsey.. they give you very good ideas ... on how to get out of debt and staying out of debt.

I have just heard so much bad about those companys.. A they take some of your money. and B they don't always keep thier end of the bargin.



answers from Chicago on

Twenty years ago I used a place that was a consumer credit counseling center and it was a non-profit. Of course it was free and they advise you of your options. They advised me to declare bankruptcy. At that time school loan could not be included in a bankruptcy. Proceed cautiously and if it sounds too good to be true it probably is. Good luck.

For Updates and Special Promotions
Follow Us

Related Questions