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Credit Counseling Scams: What to Watch For


Credit counseling has helped millions of Americans get on top of their debts. Credit counseling is also a requirement before you can file for bankruptcy protection in court.

However, credit counseling scams are rampant in the marketplace. Many counselors make claims that they can’t back up, but which sound impressive. Who wouldn’t want to wipe out debt quickly and easily? Unfortunately, credit counselors offer no silver bullet to debt. All these scammers achieve is to bilk many unsuspecting debtors out of millions of dollars.

At Nowack & Olson, we help indebted individuals find a path forward to financial freedom. Often, this includes filing for bankruptcy to help eliminate unnecessary debts. We also counsel people on non-bankruptcy options that might be more sensible given the debtor’s circumstances. Below, we highlight many of the signs that the credit counselor you have chosen is a scam operation.

They Demand High Fees

Credit counselors should work either for free or for a very low fee, under $100 usually. Any higher fee should raise a red flag.

Also be wary of any counselor that immediately tries to sell add-on services. Basically, credit counseling should consist of a look at your debt and the creation of a budget to help you pay it off.

However, some credit counselors try to sell additional services, such as a fee to negotiate with your creditors or a fee to engage in some form of credit repair. They should not even discuss these services before looking at your current financial situation first.

They Are a For-Profit Company

Most credit counselors work for nonprofit enterprises. You should ask whether the company is non-profit before signing up with them. Although there are some credible for-profit counselors, it is still a red flag.

They Receive Payment from Creditors

Some credit counselors receive payment from creditors in the form of “fair share” payments. Creditors make these payments to create an incentive for counselors to funnel as many people as possible into debt management plans, where the debtor pays back a lot of their debt plus interest.

Ask upfront if the agency receives payment from creditors. If they do, you should look elsewhere.

The Counselor Has No Time for Questions

Credit counseling is educational. It should empower consumers to take a fresh look at their debt and identify the best ways of paying it down. Credit counseling agencies should also provide informational materials free of charge.

If the counselor is in a rush and has no time for questions, then you should probably stop working with them. This might be a counselor who wants to push you into a debt management plan.

What to Do Instead

There are many reputable credit counselors. If you choose bankruptcy, you can choose from a list the U.S. Trustee has put together to receive counseling as a prerequisite to filing.

To discuss your options, contact Nowack & Olson PLLC today. Our Plantation bankruptcy lawyers have helped more than 20,000 consumers get out of debt in an efficient manner. For more information, call us at 888-813-4737 or send us an online message.


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