What is a foreclosure?

Credit Counseling is a process that involves offering education to consumers about how to eliminate debts that the consumer can’t pay by themselves.  Typically a Credit Counseling Agency, either for-profit or non-profit, represents the consumer and renegotiates payment terms with the creditors of the consumer.  A debt management plan and budget are then set to help the consumer pay the creditor.

Pros of the Foreclosure Process

• The consumer doesn’t have to worry about negotiating with creditors, the agency takes care of this for you.
• Because you are now in a “plan”, your creditors may accept lower payments (10-20% reductions are common).
• Interest rates can be negotiated lower.

Cons of Going Through a Foreclosure?

• Your credit history will be damaged.  Most mortgage companies will not allow you to refinance for a certain time period after participating in credit counseling.  From a credit risk perspective, it is commonly equated with filing a Chapter 13 bankruptcy.
• Your accounts are closed.  During the renegotiation process your creditors will close your accounts as part of the plan so you no longer will be able to use your credit cards.
• Only credit cards can be included in credit counseling.  Mortgage loans, Auto Loans, etc are not included in credit counseling.

How Much does a Foreclosure Cost?

• While there is no “cost” directly associated with a foreclosure, your lender will most likely come after you for any past due mortgage payments and related fees.

Who Should Participate in the Foreclosure Process?

• You may be a good candidate for credit counseling if you cannot afford your credit card payments and you have no other options.  Credit Counseling is typically a last resort before filing for bankruptcy protection.