Consumer credit counseling programs were created by financial institutions in an attempt to recover the maximum amount of a debt owed by consumers who may be considering debt settlement or personal bankruptcy. Agencies providing these programs work on behalf of the creditors and have absolutely no incentive whatsoever to represent your best interests.

These programs may be successful in reducing your interest rates and/or late payment and over-credit limit fees canceled or forgiven, however this is not guaranteed. You will be compelled to remit monthly payments for a four to six year term which are distributed to your creditors. Cancelled or forgiven debts are treated as taxable income by the Internal Revenue Service, thus Federal and State income taxes must be paid on the amount of canceled or forgiven debt.

This option may be a viable alternative if you are not behind with your payments, struggling to make minimum monthly payments, or foresee a guaranteed improvement in your financial situation that enables you to meet the monthly payment obligation. If so, you should calculate and confirm that the the agreed-upon payments will provide the monthly cash flow improvement you require, and recognize your credit reports will be negatively affected for at least as long the term of the agreement.

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