We've managed to pay our many bills, but it has really been hard. We've thought about a credit counseling service yet were advised that it can hurt your credit as much as bankruptsy does. Recommend or not?

I don't know how bad credit counselling can be. I don't know why it would effect your credit score, that doesn't make sense. I think you would be applauded for seeking that kind of assistance to get debt free and stay that way. There is no longer any stigma connected to bankruptcy. Sometimes it is a fact of life and must be done by individuals wanting to get on track after going in debt so deeply that there is no other alternative.

Enlisting the services of a non profit such as Consumer Credit Counseling Services will not hurt your credit per se. What can lower your credit scores is when the counseling service arranges a payment schedule with the creditor at a level less than the actual payment, the account(s) will show as delinquent on your credit report, until the debt is paid. In no case will this cause as much, or as long lasting damage to your credit as a Bankruptcy.

Sonshine,

Two things to be aware of. First, most credit counseling services are supported by the credit card companies. For them, it makes sense to take reduced payments / interest, as opposed to you filing bankruptcy and them getting nothing. Guess who's side they are on.

Second, but very important, to a creditor, enrolling in a credit counseling service means that you can not pay your bills. Some of them will report this on your credit report and it can have the same effect of a Chapter 13 bankruptcy while you are enrolled with them. NO ALL report that way, but some creditors do.

Personally, I would use them only after I exhausted all my efforts at calling the creditors and telling them that you cannot pay, but want to. Ask them to workout a plan with you. Right now, because of the tight credit environment that we are in and the number of BKs and foreclosures, the companies are more likely to work with you, but do it early. Do not be 90 or 120 days behind and ask for their help. In fact, you should call before your bill becomes late. Most will help you. If you have Chase credit cards though, don't expect any favors... just my humble opinion.

Good Luck!

I actually work for Wells Fargo collections. Nothing I say is the opinion of WFF and I would like that to be clear. I deal with CCCS everyday. Yes it does hurt your credit. On your credit report, when you look at the accounts you included on your CCCS agreement, show up as Credit Counseling Services. This will make every creditor from then on ask a lot of questions why you had to use a third party to take care of your debt. Also, the statement earlier that the financial institutions are somehow tied to CCCS organizations is preposterous. CCCS causes so many problems it is not even funny.

Realize this, creditors don't make money if you are not paying them. They are willing to work with you. Many of them will reject your initial proposals and it will take two to three months to get approved after your accrued another $300 in fees. Instead, save yourself some money and just call up the bank. I know I give people better deals everyday. Corporate America is not out to get you.

For more I have actually blogged about this topic a little better at this link: CCCS
This is from an article which you can also read which applies to you.

The person you speak with may not sound very concerned, but its not their job to sound concerned. Get over it and save yourself some money.