Credit Counseling VS. Debt Settlement: What's the Difference?

Major Advantages of Debt Settlement Like Paying Less Than 50% There are differences between getting credit counseling and debt settlement. Both are assumed to be involved with consumers who are past due and in trouble with their credit cards and other debts. Actually some credit counseling occurs prior to getting behind on bills and focuses on learning how to better manage money. Debt settlement, on the other hand, works with people who definitely are in arrears on their bills. Credit counseling can be set up as a non-profit organization or not. These counseling companies usually are paid by the creditors. One criticism is that some of these companies will take the first payment that their clients make to their company and keep it for fees rather than applying it to the bill arrangements they have negotiated. This can cause more trouble because the bill may go into collections or be written off before any payment is forwarded to the creditors by the company on the client’s behalf. Debt settlement companies can work in several ways. Some will have clients set up a special account until the sum in that account is high enough to make a creditor an offer of settlement. They then move on to the next bill until all creditors are paid something. The negotiations by a debt settlement company will reduce balances, fees, penalties, and other charges. Creditors are willing to work with credit counselors and debt settlement companies because they realize that getting paid something is better than nothing.