Debt Consolidation and credit counseling is NOT bankruptcy. It is considered an effective alternative to bankruptcy. When a consumer files bankruptcy the creditors are often forced to discharge the debt and the consumer is no longer held legally liable for the debt anymore.

If a client files chapter 13, the creditors are forced to accept the repayment terms that are established. They are also forced to accept the fact that the debtor can repay unsecured debt at a fraction of the dollar amount owed. Debt consolidation is a repayment plan that is mutually agreed upon by the creditors and the consumer. As opposed to reducing the amount od the debt that is owed by the consumer, the creditors make adjustments to repay the debt at an accelerated pace.

A credit counseling program will enable the creditor to get all of the funds that were loaned to the debtor. This type of program is not forced on the creditor lie bankruptcy and the client still maintains legal liability to repayment of the debt which limits the effect that it will have on the consumers credit.

Generally speaking the credit counseling agency calculates your payment based on a predetermined criteria that the creditors require. When on a credit counseling plan you send payments to the agency and then in turn they disperse to your creditors. Debt consolidation has proven to be an effective way of resestablishing credit and saving debtors a lot of money in interest and penalties as well as getting them out of debt faster.

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