Debt Counseling Corporation

A debt counseling corporation is a business that helps consumers that have gotten into so much debt from credit cards and other money owed that the consumer is looking for a way out without having to declare bankruptcy. These businesses act as the middlemen between card holder and credit card companies to arrange lower interest rates and a consolidation of all credit card payments so that the card holders can begin to make headway on owed money repayment. For example, a debt counseling corporation can arrange for a person who had been paying eight hundred dollars a month in credit card payments to have a consolidated payment of five hundred dollars a month. Then the consumer is asked to put that extra money on the cards' principles, paying one off at a time. As more money gets freed up, the consumer is to continue adding more and more of the extra money to the remaining principle and usually in about five years, credit card balances can be eliminated.

One of the problems with this approach is in the plan's weakest link: the consumer. Those who have used credit for so long and have lived above their means enjoying many luxuries in life that were not truly affordable but for credit, cannot get off the adrenaline rush of credit spending. When a debt counseling corporation develops a plan for a client, the client must agree not to use credit cards while on the plan. Using credit can end all agreements with creditors. In addition, a client cannot open a new credit card while on the program. This is the reason over seventy percent of those using these services fail to stay with the program.

A debt counseling corporation will put a client on a balance owed management plan, also known as a DMP. This is a strict, no second chances agreement with creditors. There can be no late payments with this agreement. A late payment can and almost certainly kills the deal with all creditors and puts the client in an even bigger mess. The debt counseling business knows exactly how much the client makes and how much money he has left over after all bills are paid. The plans are specifically tailored so that there is enough money left over after the consolidation of bills to make the one credit payment each month. Creditors are not of a mind to excuse people given a second chance to have a third opportunity.

One of the real problems with many of the debt counseling corporation plans is not the plan but the company. A number of these companies charge fees for their services that are higher than needed. There is very little if no oversight by the federal government on this kind of business. Sadly, the truth of the matter is that many of the debt counseling corporation names also have the tag as being non-profit. This moniker can be a sign to unwary customers that the business is doing financial counseling out of the goodness of its heart. Nothing could be further from the truth. Many of the so called non profits have also taken advantage of their customers by charging higher than necessary fees.

Sad to say, but some of these corporations that were originally started to help educate unwise consumers of credit do no educating at all. There is no counseling and no effort to get at the root of the misuse of credit. Even worse is the fact that some of these services have even pocketed most or all of a client's monthly payments and the client was unaware until the creditors came after them! A monthly statement with the credit card balances ought to be part of the service the counseling organization offers. So while some people actually use these programs successfully, most bail out before the program is over. For the minority who begin the programs and finish them, the result is living without debt at least for a while. Many of the successful clients enter back into the abuse of credit later on, succumbing to the desire to live above their ability to pay.

There is one final warning about using a debt counseling corporation. When the decision is made to use such a service, it affects a person's credit history for a number of years. Using this kind of relief program is a very close relative of chapter thirteen bankruptcy. This is a legal move to restructure debt so that creditors are no longer calling the debtor. Chapter seven bankruptcy is basically walking away from all money owed except taxes and some government loans coupled with losing most all assets. Chapter thirteen shows that a person wants to pay all monies owed but needs help with the schedule of repayment. Using a counseling company to restructure unsecured mony owed is much the same.


The truth about all of this debt counseling/management stuff is that every company is in business to make money off a person's bad financial decision making. If the company is truly a debt counseling corporation it will only educate the client on how to get out of the financial hole the old fashioned way. If a debt relief business consolidates all the loans down into one payment that goes to them first and then to each of the creditors each month, that business is making a profit off someone's misery. What's the old fashion way of getting out of debt? Not many people want to mess with it because it's painful and time consuming. It also means making a wholesale change in lifestyle and that certainly is not on the plate of most Americans. Making a fundamental change like that can only come through the power of God. "Therefore if any man be in Christ he is a new creature; old things are passed away; behold all things are become new." (II Corinthians 5:17)

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