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Debt settlement or credit counseling?

Debtors in Arizona could potentially benefit from understanding more about the differences between debt settlement companies and credit counselors as described by the Consumer Financial Protection Bureau. Debt settlement and credit counselor services are both valuable resources for indebted consumers, but the two are quite dissimilar. Law firms and corporations operating for profit typically provide debt settlement services. In contrast, credit counselors are often provided by non-profit organizations.

Companies providing debt settlement services arrange the settlement of a client's debt with debt collectors or creditors in exchange for a fee. These companies may be able to settle the debts by offering lump sum payments that are often less than the full amount owed by the debtor. The company then charges the debtor some proportion of the agreed settlement in fees for compensation. Some debt companies may attempt to charge debtors fees up front without having up-front agreements with any creditors.

Even when a company settles debts, the debt for the consumer may increase if debtors are instructed to no longer make any payments. Debtors who follow these instructions may still be subject to pay a penalty for any interest charges, late fees and collection efforts. In contrast, credit counselors often provide educational workshops and materials free of charge. These counselors are often able to reach upfront agreements with creditors and help debtors lower their monthly payment obligations.

People who need more information about credit counselors or debt settlement companies may benefit from contacting a lawyer. Legal counsel might be effective in helping debtors understand the alternative remedies that are available as well as assist debtors by negotiating with creditors for more favorable terms.

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  • MCBA | Maricopa County Bar Association
  • State Bar of Arizona
  • ABA | American bar Association | Defending Liberty Pursuing Justice
  • Oregon State bar
  • NACBA | National Association of Consumer Bankruptcy Attorneys
  • NACA | National Association of Consumer Advocates
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The Dodds Law Firm, PLC, is located in Surprise and serves clients throughout the West Valley area. To schedule a consultation with a lawyer, call 623-208-6098 or toll free at 877-827-9906. You can also contact us online.

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