People who are struggling financially, often, make their situation worse by making poor decisions.   Within bankruptcy, these are called “pre-bankruptcy mistakes”.  One such mistake that people make is that they try to take out loans to pay off tax debts before filing bankruptcy.  The thought is often, “this tax debt isn’t dischargeable, but this loan will be.”  Well that’s just not true, and the book Bankruptcy For Dummies clears that up.

The book speaks of Chapter 7 bankruptcies slightly different than Chapter 13 bankruptcies in regards to this situation when it says, “Loans taken to pay nondischargeable federal taxes aren’t dischargeable in a Chapter 7.  They’re treated similarly to any debt incurred while contemplating bankruptcy.”

Then it goes on to talk about a Chapter 13 bankruptcy.  The book says, “If you’re contemplating a Chapter 13, you may be tempted to borrow money to pay nondischargeable taxes with the aim of wiping out this new loan in bankruptcy (because debts from fraud get discharged in a Chapter 13).  In our view, this is a lousy stunt if indeed you are intending to defraud that lender.  And it may even cause your Chapter 13 to get dismissed if the judge thinks you acted with suspicious motives.”

Nevertheless, the best thing you can do is speak to a bankruptcy attorney before doing anything.  They are the experts in this type of situation, and they will know exactly what you should do.  You do not want to risk having your bankruptcy thrown out due to some kind of trick you come up with.  If you would like to find out more, please contact a bankruptcy attorney.

In the wake of a tidal wave of home foreclosures due to the sinking economy, some experts expect that Congress will have no choice but to take up bankruptcy reform this year.  One provision expected to be changed forbids judges to force banks to renegotiate mortgage terms with homeowners in cases where they file for protection from creditors under the Bankruptcy Code.

Consumer and banking lobby groups have been fighting to get this bankruptcy law modified for years.  Even now, when banks are more vulnerable than at any time in recent memory, efforts to include a provision in the financial market rescue plan that would have required banks to write down mortgage terms under certain conditions failed miserably.  “[Legislators] clearly decided this is not a priority,” at this time, says Ruth Susswein, deputy director of national priority at Consumer Action.  ”But we will continue to push for it, because it is the only plan that actually doesn’t cost the taxpayers anything.”  Lobbyists for the banking industry counter that consumers will simply have to pay higher interest rates charged to offset the cost of writing down bad loans, which means there would be little to no true savings for consumers.

But since today’s housing market has reached crisis point, Congress must promote additional options for the 400,000 homeowners at risk of foreclosure.  As of Oct. 1, 2008, homeowners unable to make payments and who meet the criteria set out by the Federal Housing Authority (FHA), can ask their bank to write down the value of their mortgage to at least 90% of the home’s market value and lower the interest rates on the mortgage.  In exchange, the banks get the security of FHA backing, which means the government guarantees payment should the homeowner default.

Consumer groups claim the measure won’t make much of a dent in the coming avalanche of foreclosures.  Bankruptcies are expected to continue rising, with more and more people losing their homes to lenders.  Banks foreclosed on 1.2 million homes during the first half of 2008, and this number is expected to rise even higher than the total 2007 figure of 1.5 million homes, due in no small part to the rising unemployment level.

“Soon we will discover that the bailout will do nothing to stop foreclosures,” says Henry Summer, president of the National Association of Consumer Bankruptcy Attorneys. “Changing bankruptcy law is the only way to do that.”

Congress may even tackle the 2005 bankruptcy law, addressing consumer complaints that the process is now, on average, 50% more expensive than it used to be.  Reform advocates point out that the law creates unnecessary paperwork and forces people about to file for bankruptcy into pointless credit counseling sessions that often do little more than postpone the inevitable. “Certainly there are a lot of parts of that law that are not doing good for anyone,” says Summer. “It was supposed to ferret out abuses, but it hasn’t.”

Consumers facing home foreclosure are not without hope.  An experienced bankruptcy attorney may well be able to guide them through declaring bankruptcy and keeping their beloved homes in the process.  Despairing homeowners should reach for the life preserver just within their reach–foreclosure does not have to be a foregone conclusion.

Out-of-control medical costs have definitely contributed to the ailing U.S. economy.  Not to mention pushing many consumers to the brink of financial ruin.  A recent study published in The American Journal of Medicine reveals that 62.1% of personal bankruptcies filed in 2007 could be attributed at least in part to healthcare costs.  And this was before the economic downturn swung into effect.  No wonder that more and more consumers are filing for bankruptcy, since medical costs have only continued climbing.

An article posted at examiner.com states that “[m]ost Americans who filed for personal bankruptcy due to health care costs were middle-class, homeowners who had gone to college” and that, of those, “75% reported having health insurance.”  Interestingly, these figures are contrary to previous studies looking at the causes of bankruptcy filings.  According to the Journal study, those studies failed to take into account bankruptcies that were due in major part to medical costs because of the way they were designed.

“Older studies on bankruptcy,” the article says, “were problematic because they were based solely on court records. Even though they showed that rates of medical bankruptcy were substantial, these court-based studies often understated medical bankruptcies. Why? Many medical debts were not recognizable on court records…Many medical debts were disguised as credit card debt or mortgages. Most medical debtors charged health care they couldn’t afford to credit cards or they mortgaged their homes to pay for medical bills. In addition, debts due to hospitalization or doctor visits–which were turned over to collection agencies–were not usually recognizable on court records.”

The researches in the Journal study decided to take a different approach: “They obtained 118,308 bankruptcy petitions filed in the United States between January 25, 2007 and April 11, 2007. A random national sample of 2,314 bankruptcy filers were surveyed and interviewed; their court records were also abstracted.”

Here is a bullet list relating some of the Journal findings:

* The highest out-of-pocket health care costs were associated with non-stroke neurological illnesses, such as multiple sclerosis, followed by diabetes, injuries, stroke, mental illnesses and heart disease.

* For 48% of medical debtors, hospital bills were the largest single out-of-pocket expense. Prescription drugs for 18.6%, doctors’ bills for 15.1% and insurance premiums for 4.1% of other debtors were the largest expense. Medical equipment and nursing homes where the largest expense for the remainder of medical debtors.

* Illness-associated loss of income also contributed to financial problems related to medical bills. In 37.9% of medical debtors, the illness resulted in the patient’s family member losing or quitting a job; in 24.4% of debtors, the illness led to getting fired.

* Unaffordable healthcare costs contributed directly to the bankruptcy of 92% of medical debtors.

The Journal authors draw this sobering conclusion in their study:  “[T]he U.S. healthcare financing system is broken not only for the poor and uninsured, but also for insured, middle-class families – they frequently collapse financially under the strain of the current health care system.”

For many, filing for bankruptcy protection may be the best chance to pay off staggering medical debts while holding on to their homes and automobiles.  People stuck in this tough financial situation should consult with an experienced bankruptcy attorney for a free case evaluation so they can start getting their life back on track.

The downer economy is continuing to push home foreclosures and consumer bankruptcies upward, sharing the spotlight with skyrocketing medical costs, rising unemployment, and commercial bankruptcies that have a domino effect on employees, often sending them to the brink of financial ruin in the wake of job loss.

So far, however, home foreclosures appear to remain one of the number one causes of consumer bankruptcy filings.  The American Bankruptcy Institute (ABI) reported that personal bankruptcy filings in the U.S. jumped 36.5% in the first half of 2009 versus the same time in 2008.  Relying on data from “the National Bankruptcy Research Center (NBKRC),” ABI says that “[t]he overall June consumer filing total of 116,365 was 40.6 percent more than the 82,770 consumer filings recorded in June 2008″ and does point to a small silver lining in the sky: Even though “the June total represented an increase over the previous year, it was a 6.8 percent decrease from the May, 2009 total of 124,838 consumer filings.”

On the flip side, though, “Chapter 13 filings constituted 27.7 percent of all consumer cases in June, a slight increase from May.”  That would mean that approximately 70% of filings were most likely Chapter 7 cases, meaning more consumers are liquidating rather than working out payment plans.  “As unemployment, foreclosures rates and health care costs continue to rise, more consumers are turning to bankruptcy as a last financial resort,” said ABI Executive Director Samuel J. Gerdano. “We expect that there will be more than 1.4 million new bankruptcy filings by year end.”

Unfortunately, it seems like President Obama’s plans to help keep homeowners home sweet home is having a tough time gaining ground.  The San Jose Mercury News reported on July 16 that “Banks say they’re swamped with inquiries and are just now completing the first mortgage ‘loan modifications’ under the Obama administration’s Making Home Affordable plan, the program begun in April requiring borrowers to make three months of renegotiated payments before securing new loan terms.”  The unpleasant reality is that “frustrated borrowers are still battling red tape and delays in their attempts to negotiate lower payments, even as hundreds of thousands of them lose their homes every month.”

Some do their absolute best to work out a fair compromise, but to no avail:  “Angelo Gallo, 46, of San Jose, sought help from his bank lowering his monthly payments in January, before the Obama plan was announced. He said he and his wife, Mary, worked with their lender for five months, fulfilling numerous requests for more documents, but recently they were told they had to start over. ‘I was so frustrated,’ Gallo said. ‘Every time you call it’s a different person, and it seems like the files are all over the place.’ “

“There is an amazing lack of staffing to support the flood of modification requests the banks are getting,” said San Jose bankruptcy lawyer Norma Hammes, past president of the National Association of Consumer Bankruptcy Attorneys. “Lenders lose stuff all the time, and they ask for stuff they don’t need. We have to jump over hurdles and through hoops.”

Bankruptcy lawyers, the article says, “are particularly critical of the banks. The banks’ current efforts are ‘largely a farce,’ according to Cathy Moran, a bankruptcy lawyer in Mountain View, CA. She said most of her clients have been unable to modify their home loans.

‘I don’t think the people in the loan modification departments at banks are empowered to make deals,’ Moran said.”

San Jose bankruptcy lawyer James “Ike” Shulman agrees: “I’m seeing several people each week with the same hard-luck story of how mortgage lenders have led them on for months, lose the paperwork and then find one excuse or another to turn them down.”

Of course, bank reps say they’re doing the best they can.  “Chase is moving through a backlog of 155,000 loans ‘as fast as we can, having hired nearly 3,000 people to help in the process, including 950 loan counselors,’ spokesman Thomas Kelly said. The bank, which took over failed subprime lender Washington Mutual, has approved 87,100 trial loan modifications under the federal plan, Kelly said, and an additional 50,900 under the bank’s own program.”

But the Mercury’s reporter, Pete Carey, says this in his article: “Though the reasons are many,” he writes, “the problem is simple: Banks aren’t renegotiating enough loans to stem the rising tide of foreclosures, either through the federal program or on their own.

‘If the banks wanted it to work, it would work,’ said Fred W. Schwinn of the Consumer Law Center in San Jose.”

Those at their wits’ end with trying to negotiate with unhelpful mortgage lenders would do well to consult with an experienced bankruptcy attorney to find out whether bankruptcy could be the solution to their financial woes.

Deciding whether or not to file for bankruptcy can be a major, life-altering decision.  Some people are so scared of taking that plunge, they avoid considering it completely–which could be a big mistake.  Bankruptcy may not be for everyone, but there’s certainly no harm in at least considering it in your specific situation.  Who knows?  It just might be the financial fresh start you need to get your life back on track!  Here’s a list of questions to ask yourself to make your decision easier.

Q:  Have I done my sincere best to negotiate with creditors?

If you’ve tried to work out a repayment plan with one or more of your creditors, but they’re not willing to budge on wanting the full payment now, bankruptcy may be your best option.  During bankruptcy proceedings you’ll have the benefit of an automatic stay prohibiting your creditors from making any collection attempts while the court oversees your case.  Just think–no more harassing telephone calls or dealing with inflexible people unwilling to negotiate a practical payment plan you can actually afford.

Q:  Do my liabilities outweigh my assets?

This is often the bottom line question when it comes to deciding whether or not to file for bankruptcy.  If your money out exceeds the money you have coming in, it’s only a matter of time before you find yourself drowning financially and bankruptcy may become your only option.  By considering it before things get completely out of control, you may find yourself with a little more control than if you wait until your hands are tied.

Q:  Are my wages being garnished?

If your wages are being garnished and you’re now having an tough time making ends meet, bankruptcy may help give you breathing room while you juggle all your financial responsibilities.  While certain types of debt–such as child support and alimony–are non-dischargeable in bankruptcy, you may be able to have enough of your other debt discharged that the wage garnishment won’t financially strangle you anymore.  Alternatively, if you don’t qualify for Chapter 7 bankruptcy, you may be able to work out a manageable payment plan through Chapter 13 bankruptcy instead.

Q:  Are most of my debts unsecured?

Unsecured debts are those like credit cards bills and medical bills that do not have some form of physical property securing them, like car loans or home mortgages.  In most cases, you are going to have to pay most if not all of your secured debt like car loans or mortgages if you wish to retain possession of your car or home.

Q:  Am I more than 30 days late on more than one bill?

The more and more delinquent you become on multiple bills, the harder you’re going to find it to catch up, and the more damage that’s being done to your credit score.  Once this happens, you may well do less damage in the long run by filing for bankruptcy and then re-establishing responsible credit use than continuing to become more delinquent on your bills.

These are just a few questions to consider when looking at your bankruptcy options.  It’s better to look at the situation logically, and with as little negative emotion toward the thought of filing for bankruptcy, as possible.  Only then can you truly make the decision that’s best for you.

Many people–and that includes some tax professionals–have the mistaken impression that federal income taxes can never be discharged during the bankruptcy process.  Fortunately, though, this common myth isn’t entirely true.  And even in situations where the tax debt can’t be discharged, breathing room can often be obtained for the cash-strapped taxpayer.  By filing a bankruptcy petition, the debtor gains an automatic stay which forces all creditors (including the IRS) to stop all collection attempts, bank account levies, and wage garnishments.  This buys the debtor time to either obtain a discharge or reorganization of his or her tax liabilities.

Congress passed the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 (BAPCPA), essentially merging the tax discharge rules applicable to Chapter 7, Chapter 13 and Chapter 11 bankruptcies.  The rules governing possible tax discharge can be as winding as a mountain road, and experienced bankruptcy attorneys are likely the best qualified to advise a taxpayer how they apply to the specific facts and circumstances of a case.  A general rule of thumb (but by no means always accurate) is that most “old” taxes can be discharged, while “new” tax liabilities are non-dischargeable.

Typically speaking, the Bankruptcy Code allows for discharge of tax debt when the following requirements are met:

* the tax return was filed more than two years before the bankruptcy filing;

* the tax return was due more than three years before the bankruptcy filing;

* the tax liability was assessed more than 240 days before the bankruptcy filing;

* the taxpayer did not file a fraudulent tax return or engage in tax fraud or evasion; and

* a tax return was actually filed for the delinquent tax liability.

To put it more succinctly, bankruptcy discharge of a personal income tax liability will depend upon the lapse of various time periods from the due date of the tax return, the actual filing date of the return, and the tax assessment date, up to the date the taxpayer filed a bankruptcy petition.  One way to think of these time periods is that they are separate statutes of limitations that expire at different time frames.  Upon the expiration of all the “statutes of limitations”, a tax liability becomes a dischargeable “non-priority tax” versus a formerly “priority tax”.

In situations where the government has filed a Notice of Federal Tax Lien against the taxpayer’s property, things can get even more complicated.  A filed Federal Tax Lien attaches to a taxpayer’s real and personal property–all of it–and must be considered when taking into account possible delinquent tax solutions like filing for bankruptcy.  The complex interplay of delinquent federal tax liabilities, a filed tax lien and bankruptcy makes an already complicated area of law even more complicated thanks to certain provisions contained in the BAPCPA.  Those who have had federal tax liens filed against them should immediately consult with knowledgeable tax and legal counsel.

Don’t be duped by a name.  Channel 11 reports that a Houston based company called, “Public Safety Services,” has engaged in fund-raising activities for the Dallas Police Department by representing that DPD will be a recipient of proceeds and posting official DPD pictures on their web site.  At first blush, not that significant since law enforcement agencies can generally use all the funding they can get.  The problem, however, is that despite their cleverly vague name, they are not associated with DPD.  As such they are now being accused of using a non-existent affiliation to receive donations.  According to the article, 80% of the donations remain with the organization.  The Better Business Bureau expressed concern in that, reputable fundraising organizations generally forward around 65% of their proceeds to the charity.

Similar to “Public Safety Services,” many debt collectors will use the same tactic.  They invent names to make it appear to you that they are with some type of enforcement agency.  The twist on names is endless, but some include “Law Enforcement Systems, Inc.” and “National Credit Management.”  Debt collectors are not allowed to represent that they have an affiliation, when in fact they do not.  Regardless, many will design names like these which push the “name game” envelop.  Watch for any trigger words like “national”, “Law”, “State”, and “American.”  The hope is that the name will scare or trick you into paying on the account they are attempting to collect.  If you are not sure whether they are with a particular governmental agency or an particular attorney’s office, pin the debt collector down and ask them to officially state which agency they claim to be associated with or working for.  You can then call the agency or firm to verify the affiliation, and report the fraud if need be.

Dealing with a debt collector can be scary or disturbing, especially when they are using intimidating tactics like these.  Fortunately, you can get help through a qualified bankruptcy attorney.  It doesn’t matter to the bankruptcy court, or attorney for that matter, how important or cool the collector’s name sounds.  What does matter is that they are collecting on a legitimate debt, that they correctly represent the balance which is due, and that they cease collection activities after your filing for bankruptcy.  A good bankruptcy attorney will insure that they follow these basic principles. The general purpose of bankruptcy is to help you get back on your feet financially.  But it also has the effect of protecting you from unscrupulous collection efforts.  You get this protection bonus regardless of the type of bankruptcy that you file.  Once you file for bankruptcy, you will notice an end to the collection games end and your family can get back to financial normalcy without being duped or harassed.

The laws which protect consumers from abusive debt collection practices have been on the books for several years now.  Even though these rules have been publicly enforced, many debt collectors continue to use abusive tactics.  Since the onset of the recession, the FTC has requested additional reform measures because the number of complaints regarding abusive practices have increased.  Considering the ongoing debate over health care and stimulus spending, it is unlikely that reform will come anytime soon.

In the interim, the best way to deal with a debt collector is to arm yourself with information about consumer laws.  Probably one of the most important definitions within the Texas act is the definition of “consumer debt.”  It officially means “an obligation, or an alleged obligation, primarily for personal, family, or household purposes and arising from a transaction or alleged transaction.”  You’re probably wondering why the focus on this definition?  Because the classification of your debt determines whether or not you are entitled to protection under either the federal or Texas consumer laws.  Consumer debts get protection.  Non-consumer ones do not.

For example, in an opinion published by the FTC, they determined that community association assessments are “consumer debts” because they arose out of a transaction for a household purpose, which was a covenant associated with the purchase of your home.  Consequently, you can seek protection under collection laws when your home owner’s association forwards an allegedly delinquent account to a collection agency.

On the reverse side, a credit card which you use for your small business is not considered a consumer debt.  Consequently, a debt collector can call and harass you about payment of that account.  In the same respect, more and more government agencies are utilizing collection agencies to collect their fees and assessments.  Depending on the origin of those fees, they too may be excluded from the definition of “consumer debts.”  In another FTC opinion, they determined that court costs due as part of a child enforcement action were not consumer debts.

Dealing with a debt collector is stressful and often confusing because of the tricks used by debts collectors and loopholes within the law.  If a debt collector is harassing you, another option is bankruptcy.  Even though some types of debt obligations are treated differently during bankruptcy, you can still get protection from harassing debt collectors for all categories of your debt.    Once you file for bankruptcy protection, your attorney becomes your advocate.  The collector is then required to communicate through your counsel.  This helps take an immense amount of pressure off of you and your family.  You can then focus on resolving your debt obligations and rebuilding your financial health.

Many people view dealing with debt collectors in the same light as they do getting a root canal–as an exceedingly unpleasant experience.  They tend to call you at the most inconvenient hours of the day, especially when you’re trying to spend rare quality time with your family.  With that being said, there are certain things you can do to make dealing with debt collectors–if not more pleasant–a more successful endeavor.  If you’re currently dealing with debt collectors, it’s best to avoid the following situations:

1.  Lying.  Don’t do it!  If you’re caught in a lie, it’s possible you could find yourself being sued.  Be truthful in your dealings with debt collectors.  Honesty truly is the best policy here.

2.  Settling without an acknowledgement letter.  Again, don’t do it!  If you pay off the debt, make sure you get an acknowledgement–in writing–from the creditor stating that you’ve paid your debt in full and that the account is now closed.  Don’t just stop here, however.  Check your credit report in a few months to make sure that the credit line in question shows “closed,” “settled,” “paid as agreed,” or something similar.

3.  Not disputing charges quickly.  The moment you discover a charge made against your account that you believe is in error, you should immediately file the appropriate claim.  States typically have specific statute of limitations regarding disputing charges, so you need to act quickly so you don’t lose your legal right to dispute such claims.

4.  Hoping the situation will just go away.  Wrong!  Ignoring past due debt is not going to make it just go away.  For one thing, the collection agency can sue you if they have a legitimate claim against you and you aren’t engaging in communication with them.  If you have a job, they may be able to win the right to garnish your wages.  If you’re just not sure what to do, it’s a good idea to discuss a good bankruptcy attorney to find out what your options are.

5.  Bouncing checks.  This is another huge no-no!  If you bounce checks to the creditor, they’re going to bounce your case directly to their legal department and chances are good you’re soon going to be the not-so-proud owner of a lawsuit.

6.  Letting yourself be bullied.  Do not let any debt collection agent bully you around.  You deserve to be treated with respect (and hopefully you are treating your debt collectors the same way) and you also have the right to find out all available options open to you.  It may be the right time to consult with a reputable bankruptcy attorney.

7.  Letting creditors directly deduct funds from your bank account. Not a good idea!  Don’t give any creditors your checking account number.  You may find yourself in the situation of more than one creditor deducting money at the worst possible time, leaving you in a financial bind until your next paycheck.  Alternatively, this also increases the odds you could fall prey to a scam or unscrupulous person stealing money from your account.

Hopefully, by following these basic guidelines, you will be able to have better dealings with your debt collectors.  Keep in mind that you always have the option of contacting a bankruptcy attorney to find out whether filing for bankruptcy protection is a good option for you.

Reputable credit counseling agencies can provide a well-needed service of helping debtors establish open lines of negotiation with creditors, and hopefully eventually negotiate a successful repayment plan so consumers can avoid lawsuits or spiralling into uncontrollable debt.  Disreputable credit counseling agencies–often otherwise known as scam agencies–are another matter entirely.

Some credit counseling services take advantage of people who find themselves in financially (and emotionally) vulnerable positions.  Some go from taking advantage of consumers to outright stealing from them.  The Federal Trade Commission Act forbids “unfair or deceptive acts or practices” in credit repair and counseling agencies, and some states even have laws making it illegal for credit service organizations to advertise or claim they can improve credit ratings.  Some states also require that credit counseling organizations register with the state Attorney General’s office and obtain a surety bond before they can open for business.

But what about those agencies who either aren’t required to do that sort of thing, or manage to operate under the radar of the appropriate authorities while they bilk customers out of money in the meantime?  The absolutely best defense you can devise is a good offense–meaning educate yourself as much as possible.  Here are some questions to ask when researching credit counseling agencies.

1.  Is the agency accredited by one of the voluntary accreditation organizations, such as The National Foundation for Credit Counseling or the Association of Independent Consumer Credit Counseling Agencies?  The NFCC acts as an independent, not-for-profit organization and has accredited more than 4,000 credit counseling programs that meet their standards.  The AICCCA is a similar national organization that has equally high standards for credit counseling agencies.  If an agency doesn’t belong to one of these two voluntary organizations, you may want to reconsider before signing up with that particular agency.

2.  Does the agency make outlandish claims that it can instantly repair your credit rating?  If so, it may be a good idea to run in the other direction.  The process of rebuilding credit is a gradual one, and it can’t be rushed.  For instance, it’s illegal to try and “fix” your credit history by constructing a new, false identity.

3.  Does the agency charge any improper or downright illegal fees that can be disguised as “contributions”?  If the agency charges high setup fees or monthly charges, that pretty much negates any good they can do for you by reducing finance charges or your debt obligation with creditors.  At that point, you’d likely be better off negotiating directly with creditors or filing for bankruptcy protection (via a reputable bankruptcy attorney).

4.  Does the agency request that you hand over money in order to obtain a promised loan?  Do not agree to do this!  The FTC’s Telemarketing Sales Rule dictates that no one can legitimately ask you for money until you actually receive a loan or line of credit.  You should learn as much as you can before agreeing to any debt consolidation loan, obtain all details in writing, and AVOID giving out your credit card, bank account, or Social Security information over the phone or via the Internet.

5.  Have any other consumers registered complaints against the agency with the state Attorney General’s office or local Better Business Bureau?  If so, that doesn’t automatically mean you shouldn’t deal with the agency, it just means you should get as much information as you can.  One or two complaints is to be expected against almost any business–dozens or hundreds of recent complaints, on the other hand, can be a severe red flag.

6.  Will your creditors even deal with that particular credit counseling agency?  If not, there’s obviously no point in signing up with the service.

7.  Is the credit counseling agency willing to put everything in writing, especially the specifics regarding the fees they will collect and the services they will perform?  If not, I think you can guess what my advice will be–RUN–do not walk–in the opposite direction.

8.  Do you understand the propoed written agreement with the credit counseling agency?  If not, you should either consult a knowledgeable financial services or bankruptcy attorney to make sure everything’s on the up-and-up, or decline to sign with that agency.  NEVER sign an agreement that you do not understand, in any sort of endeavor.

One last piece of advice:  should you find yourself the victim of any unscrupulous or fraudulent tactics on the part of any credit counseling agency or service, you should immediately report it to the consumer protection division of your state Attorney General’s office.  You can also lodge a complaint with the Federal Trace Commission Consumer Response Center by dialing (toll-free) 1-877-FTC-HELP or going to the FTC’s website to fill out their Consumer Complaint form.