Credit Counseling and Bankruptcy

: Reese Baker & Associates

  Filed under: Credit

In the early 1950s, the united states began seeing credit counseling agencies opening for business. Home construction was on the increase, and the American public was borrowing more money.


The national foundation for credit counseling NFCC was created in 1951 to advocate for the credit industry and work with consumers that needed help paying their debt.

Since the credit counseling industry was created to benefit lenders, they still provide financial support for the credit counseling industry. The primary goal of most credit counseling agencies is to get you to sign up for a debt management plan (DMP) to pay back your debt in full.


Why would a consumer sign up with a credit counseling agency? For one thing, you will stop receiving calls and letters from your creditors. The counselors will contact your creditors and tell them you are on a DMP.

The payment terms usually run up to five years. Often the lenders agree to remove late payments as long as you make your payments on time. Negative entries before your DMP will still remain on your credit report.


These agencies keep up to 15% of your payments as a “fair share payment.” Sometimes these agencies collect an upfront fee for “administrative costs” and also ask for voluntary donations. Some people report that their credit scores were worse after paying their debts in full while working with the credit counseling agencies.

If you have tried credit counseling and realize it is not the best for you and your finances, or you tried one and got behind and were worse off than before, contact a Houston bankruptcy attorney to find out how to eliminate debt without making payments.