Letters to the Editor

Credit counseling delays inevitable

Regarding "Housing woes deepen in valley" (Sept. 18, Page A-1): I have had several clients use my services after spending thousands for a credit counseling service to clean up their debts. I am a bankruptcy attorney. One gentleman, in a family of four, was $45,000 in debt, almost exclusively to credit cards. He owed $376,000 on the first and second mortgages on his home, which was on the market for $269,000, with no offers. Without the credit card debt he could make it, barely. He paid $9,000 to a credit counseling service. The service is front-loaded, which means it pays itself first and then deals with creditors. Sure enough, the bills stopped coming. A check of his credit report showed that most of his creditors had written off his debt.

A few months later, bills from bill collectors started arriving. Eventually a collector sued and won and got a wage assignment. It turns out one of the creditors had written off the debt, taken a tax write-off, and sold the debt to a collector. It was only a matter of time before the rest of the creditors and bill collectors would swarm on his wages.

To this gentleman, walking away from the house, taking a foreclosure, filing for bankruptcy and saving his wages was the only solution. Beware of credit counseling services. Make sure you get a statement showing the debt is "satisfied" or a written contract from each creditor reciting the terms of settlement.