# Credit counseling--who pays?

**URL:** <https://boards.straightdope.com/t/credit-counseling-who-pays/220333>\
**Category:** Factual Questions\
**Created:** [December 21, 2003, 5:41pm UTC](https://boards.straightdope.com/t/credit-counseling-who-pays/220333 "2003-12-21T17:41:03Z")\
**Posts on this page:** 5\
**Page:** 1

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**Author:** ![Zardoz](https://avatars.discourse-cdn.com/v4/letter/z/a8b319/32.png) [@Zardoz](https://boards.straightdope.com/u/Zardoz)\
**Post date:** [December 21, 2003, 5:41pm UTC](https://boards.straightdope.com/t/credit-counseling-who-pays/220333/1 "2003-12-21T17:41:03Z")

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I just saw another credit couseling commercial on tv, a long, expensive-looking commercial and it made me wonder, who pays for this? These places are non-profit, but surely it’s not a government organization–or is it?

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**Author:** ![CheekyMonkey613](https://avatars.discourse-cdn.com/v4/letter/c/e480ec/32.png) [@CheekyMonkey613](https://boards.straightdope.com/u/CheekyMonkey613)\
**Post date:** [December 21, 2003, 5:51pm UTC](https://boards.straightdope.com/t/credit-counseling-who-pays/220333/2 "2003-12-21T17:51:24Z")

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I’m not sure how it works, but from what I understood from a friend who went bankrupt, she had the choice of that or using the credit counsellor. Even when you go bankrupt, you have to pay a certain amount per month to do it. Basically you’re in bankruptcy for a while (a few months), and for that amount of time, you pay monthly to the company who files your bankruptcy.

But with credit counsellors, they basically act as negotiators. They call up your credit card companies etc., and say “Your client is willing to negotiate to pay a certain amount LESS than what they owe. Are you willing to negotiate? Either that or s/he’s filing for bankruptcy.” Most companies would rather get SOME money back than NO money back, so they cooperate.

Either way, your credit report is royally screwed. It’s just “not as bad” as claiming bankruptcy. And if you’re ever asked on a form if you have ever gone bankrupt, you can legitimately say “No”.

Of course, this is coming from a Canadian friend; things probably work differently in the US. And I’m certainly no professional in the matter. But that’s how I understood it.

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**Author:** ![friedo](https://avatars.discourse-cdn.com/v4/letter/f/8edcca/32.png) [@friedo](https://boards.straightdope.com/u/friedo)\
**Post date:** [December 21, 2003, 6:20pm UTC](https://boards.straightdope.com/t/credit-counseling-who-pays/220333/3 "2003-12-21T18:20:22Z")

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The credit counseling services that advertise on TV are indeed non-profits, which are funded by the big creditors (banks.) They support the counseling services because their job is to organize your debt, and negotiate payment schedules to get you back on track. This may end up actually saving you money, but the creditors like it because it means they’ll be getting _something_ instead of delinquent accounts or a bankruptcy.

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**Author:** ![Duckster](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/duckster/32/1244_2.png) [@Duckster](https://boards.straightdope.com/u/Duckster)\
**Post date:** [December 21, 2003, 6:30pm UTC](https://boards.straightdope.com/t/credit-counseling-who-pays/220333/4 "2003-12-21T18:30:32Z")

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And in the case of one of the biggest “credit couselors,” they ae being sued by the federal government for fraud:

> [@](#):
>
> **Federal government sues AmeriDebt**
> 
> WASHINGTON, Nov. 19 - Federal regulators filed their first lawsuit against a credit counseling company Wednesday, charging that industry giant AmeriDebt used deceptive marketing to bilk hundreds of thousands of customers.
> 
> AmeriDebt touts itself as “the friend of consumers in crisis,” but the Federal Trade Commission alleged the company hid fees and did not educate people about how to get out of debt. The FTC, which filed the lawsuit in U.S. District Court in Greenbelt, Md., also claimed the company falsely described itself as nonprofit.
> 
> Regulators allege AmeriDebt made customers think that an initial fee would be part of their debt-reduction payments to creditors. Instead, it went to AmeriDebt.

Source: [http://msnbc.msn.com/Default.aspx?id=3540935&p1=0](http://msnbc.msn.com/Default.aspx?id=3540935&p1=0)

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**Author:** ![ftg](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/ftg/32/2801_2.png) [@ftg](https://boards.straightdope.com/u/ftg)\
**Post date:** [December 21, 2003, 9:54pm UTC](https://boards.straightdope.com/t/credit-counseling-who-pays/220333/5 "2003-12-21T21:54:13Z")

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Note that so-called “non-profit” services are many, many times a complete scam. They take your money and don’t pay the creditors. See the above AmeriDebt stuff.

“Non-profit” does NOT mean:

1. They are legit.
2. They are charities.