One of our borrowers recently closed down her business and is now thinking about entering into a credit counseling program to pay off all of her credit card debt b/c she cannot afford her current payment obligations.
It has been, however, our observation over the years that borrowers in this situation are far better off if they file for Chapter 7 (liquidation) Bankruptcy (BK) protection instead of entering into credit counseling.
Borrowers filing Chapter 7 eliminate all of their consumer debt with a single adverse credit event and get a chance to start over without the burden of all the payments. Chapter 7 borrowers can get FHA mortgage financing two years after a BK discharge.
In contrast, borrowers in a credit counseling program often still have payment burdens and negative credit reports (late payments/counseling) that can linger for years and years. Credit counseling often prevents borrowers from obtaining mortgage financing for much longer than a BK would have.
Founder/Broker | JVM Lending
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