You are required to have a 1/2 hour credit counseling certificate in order to file Chapter 7 or 13, and another credit management course in order to get a discharge. Our law firm assists you in this.

Another kind of bill consolidation is not done through loans, but through counseling, and budgeting, and making a payment to a private company or social service agency that makes arrangements with creditors.

This does not preserve your credit, because you are not supposed to borrow any more while you are consolidating your bills. Also, it is very difficult to get all creditors to agree to accept lower payments, and if just one sues you, it can upset the whole plan. Unlike Chapter 13, there is no court protection to guarantee that no one will garnish your wages or harass you while you are making lower payments.

I often advise people to do other things than file a bankruptcy. But bill consolidation companies that are private companies are not such a good idea, because those companies are motivated solely by profit. They are not run by attorneys who have an ethical duty to advise you properly. I have had many people come to me for bankruptcy work after they have made payments to a private bill consolidation company, only to have creditors still bother them, and to have no idea where the money they paid has gone. I have not had that experience with charitable organizations who do credit counseling, although some of them advise people to see a bankruptcy attorney when it is obvious that credit counseling is not the answer, or when creditors will not agree to any forbearance.

Some credit counseling agencies are even run by the creditors, so they are actually just bill collectors whose job it is to protect the creditors that pay their salaries, and they may give you incorrect advice to get you to pay them, when you would be better off with a bankruptcy.

Generally, if your bills are less than $5,000.00, you might benefit from credit counseling, and an informal bill consolidation through a not-for-profit credit counseling service. If your bills are over $5,000.00, generally it will take about $200.00 per month or more to pay the bills in a reasonable period of time, and if your bills are very much more than that, it will take so long to pay them, that an arrangement with creditors is useless. You may want to consider starting fresh with a bankruptcy, and perhaps just keeping your car or house payments only, instead of making things difficult for yourself for years by trying to pay everyone, unless you are sure that you will be able to.

The problem for the past 7 or 8 years has been that salaries are not keeping up with living expenses. Next year, your rent, food, and just about everything else, will cost you more than they did today. If your salary does not go up as much as those costs, you will have less to spend on paying creditors. If you start to repay them, and then find out that you really can't afford to do it, you have just wasted any money you gave them.

When I see people in my office, I work out a budget for them and try to determine in advance, what their job prospects are, whether they are getting 10% raises every year, and whether or not they have excess income available to pay their bills. If they do, I advise them to do so. If they don't, Chapter 7 bankruptcy is a good way to get rid of bills and concentrate on just living.

I like people who are reluctant to file a bankruptcy to go to a "bill consolidator" first. That way, they know how high their payments will be if they don't get bankruptcy relief. However, some bill consolidators tell lies about the Federal Bankruptcy Code. That is because they get a kickback from the credit cards and finance companies if they convince you to "consolidate."

In fact, the parent organization of the outfit called Consumer Credit Counseling is directed by creditors such as Avco Financial Services, Household International, J.C. Penney, and major credit card operators like Citibank. So you are going to the same people who profit by keeping you in debt. That is like the chicken asking the fox for advice!