Bankruptcy Often Better Than Credit Counseling

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.

Jay Voorhees
Founder/Broker | JVM Lending
(855) 855-4491 | DRE# 01524255, NMLS# 335646