For those of you that are familiar with my previous columns, you’ll remember that I’ve written quite a few articles on credit counseling and also that I do not like credit counseling. “Sure,” I hear you say, “Of course a bankruptcy attorneys don’t like credit counseling. It’s the competition!” And yes! I do not like that credit counseling is my competition, because credit counseling is terrible and it makes me feel bad for competing with something that terrible, it doesn’t feel fair. Still, it’s not as though I love bankruptcy either. In all honesty, I think the entire debt system is broken and that neither of them should exist.
Now that I’ve gotten that off my chest I’ll step down off my soapbox for at least a little bit. I’ll get on a smaller, more stable soapbox and hit you with what I think is the worst scenario to face legally when filing bankruptcy or entering into a credit counseling program. I’ll show you what this worst scenario would look like, objectively.
In this situation, since private employers are allowed to discriminate against you, any employer you apply to in the future would most likely look less favorably at your application versus someone with good credit. The employer may not want to hire someone who has distracting financial troubles that could affect their performance.
Landlords would also discriminate against you, as they obviously don’t want someone who can’t pay their bills on their property. While I don’t have any empirical evidence for this, if I had to guess, I would say that a landlord would be more inclined to rent to someone who had just finished bankruptcy than someone enrolled in credit counseling. The reason I think this is because the bankruptcy filer is at least clear of all debt, increasing the likelihood of the rent being paid on time. However, I’m not quite sure how a landlord would look at a person with credit counseling, as their credit wouldn’t necessarily drop and the landlord may not notice.
Future lenders would either charge you a higher interest rate on your loan or deny your loan altogether. If you filed bankruptcy, you’d have to rebuild your credit score, as the sooner they’re rebuilt the sooner you can charge a decent rate. However, if you’re in a credit counseling program, it will be difficult to impossible to finance anything, as lenders would see that you had trouble managing your account and are still dealing with outstanding debts.
Both bankruptcy and credit counseling were designed to help people in debt. Both have helped people in debt. Both have lasting effects (as listed above) that some are not aware of and that should be considered prior to taking any action. The major difference that bankruptcy attorneys everywhere want to be sure everyone is clear on this…bankruptcy leaves you with a clean slate called a discharge of debt. Credit counseling does not provide you with a discharge of debt. This one difference is why I can state emphatically that bankruptcy is the clear winner when trying to decide which is more helpful: bankruptcy or credit counseling.
If you are still unsure what bankruptcy could do for you, please get in touch with the experienced southern California bankruptcy attorneys at Westgate Law. We can help you pinpoint the pros and cons and decide what will suit your situation best.