subject: Debt Counseling - Pros and Cons [print this page] Debt Counseling - Pros and Cons
Pros:
You are showing your creditors that you are serious about alleviating your predicament. They will work with you and your debt counselor to reach a mutual agreement.
Debt restructuring will be done with your remaining income, after deducting your basic essentials, such as transport, food, clothing, rent, utility bills, etc.
While under 'debt review' your creditors cannot institute legal proceedings against you for debt repayments. A debt distribution agency will handle your 1 monthly payment for distribution to all your creditors.
If a creditor did not do the necessary checks to ascertain that you earn enough money to repay your debt, they could be charged with reckless lending and that particular debt might even be scrapped.
After debt counseling your credit record is 'wiped clean', allowing you to qualify for credit in the future. If you file for bankruptcy your credit history will count against you in future applications.
You will have no more sleepless nights, stress and a lack of concentration at work.
You will learn how to budget and be a better steward of your finances, which will aid you long after debt counseling.
Cons:
While under debt review you are forbidden from applying or receiving any new credit or an extension of an existing credit. This will lead to cancellation of your debt review.
Your basic living expenses will have to be reduced drastically. E.g. Lower your transport and leisure costs.
Debt counseling fees will be charged, but these are incorporated into the first 2 months under debt review.
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