Credit Counseling vs. Bankruptcy: A Creditor’s Perspective
For over 25 years, I represented debtors, filing more than 4,000 Chapter 7 and Chapter 13 bankruptcy cases. Today, my focus has shifted to representing creditors, ensuring they recover the money they are owed. Understanding the role of credit counseling versus bankruptcy is crucial for both debtors and creditors navigating financial disputes.
The Truth About Credit Counseling
Myth: You should try credit counseling before even considering filing bankruptcy.
Truth: Credit counseling agencies primarily work to help creditors recover money owed to them. While credit counselors may seem supportive, their allegiance lies with the credit card companies paying them to collect debts—not with the individual debtor.
Creditors often recommend credit counseling because it benefits them. Credit counseling agencies can submit proposals to creditors, but they have no legal authority to force creditors to accept these proposals. Many credit counseling organizations have even been exposed as disguised collection agencies working for credit card companies.
Why Credit Counseling Benefits Creditors
Credit card companies favor credit counseling over bankruptcy because:
- Debt Recovery: Credit counseling increases the likelihood of recovering outstanding debts in full or partially.
- Long-Term Debt Payments: It keeps individuals tied to repayment plans for longer periods, maximizing interest and fees.
- Avoiding Discharge: Bankruptcy can wipe out debts entirely, which is not in the creditor’s best interest.
As a creditor’s attorney, my role is to ensure that legitimate debts are recovered while working within the legal framework. Understanding the limitations of credit counseling helps creditors and debtors alike make informed decisions.
Bankruptcy: A Legal Solution for Debt Resolution
Unlike credit counseling, bankruptcy provides a legal avenue to address debts comprehensively. A qualified bankruptcy attorney can submit proposals that compel creditors to accept terms for debt discharge or repayment under court supervision.
For creditors, bankruptcy cases are an opportunity to assert claims and recover a portion of what is owed. Proper legal representation ensures creditors’ rights are protected during these proceedings.
Key Takeaways for Creditors
- Credit Counseling Limitations: Credit counseling is not legally binding and often serves as a precursor to bankruptcy.
- Bankruptcy Opportunities: While bankruptcy may discharge debts, it also provides a structured process for creditors to recover funds.
- Legal Expertise Matters: Working with a knowledgeable attorney ensures creditors’ claims are properly represented in bankruptcy court.
Get the Right Representation
If you are a creditor seeking to recover debts owed by a Texas debtor, I can provide the legal expertise you need. My extensive experience as a former debtor’s attorney allows me to anticipate challenges and navigate cases effectively, ensuring you recover what you are owed.
