Consumer credit counseling, debt management, and financial education services provided by non-profit credit counseling companies designed to establish equilibrium between consumers, creditors, and member agencies for the successful rehabilitation of debt-challenged families and individuals.

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The AICCCA mission is to promote quality and professional delivery of credit counseling services. AICCCA independent non-profit member agencies assist millions of consumers annually with counseling and debt management services. Find out more about joining the AICCCA.

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AICCCA Finds Consumers Confused About Differences Between Credit Counseling and Debt Settlement

Fairfax, VA - April 26, 2010 — In our troubled economy more and more people are having trouble paying their debt. When seeking help, many consumers are confused about their options. The U.S. Senate is currently holding hearings regarding debt settlement. The Association of Independent Consumer Credit Counseling Agencies (AICCCA) encourages consumers to learn the differences between services offered through credit counseling and debt settlement.

"The major difference when repaying debt through credit counseling with a debt management plan (DMP) is the consumer will repay the entire amount of debt owed whereas with a debt settlement plan the consumer will repay only a portion of the total debt owed," said Dave Jones, president, AICCCA. "Many other differences exist that consumers should study before making a decision on how they will solve their debt problems."

To help consumers AICCCA provides the following for consumers to consider:

Credit Counseling: AICCCA member offices and most other agencies are non-profit organizations. All provide a free initial counseling session where a certified counselor will provide a thorough review of your financial situation and make recommendations based on your goals for seeking assistance. Possible recommendations might include budgeting advice where many consumers are able to follow the new budget and work out their problem debt themselves, a debt management plan, where consumers repay their debt through the DMP, or a referral for assistance outside of what is offered in credit counseling such as bankruptcy or family counseling.

Debt Settlement: Most are for-profit companies that offer to negotiate with consumers' creditors to pay less than what is owed. Often an upfront fee of several hundred to several thousands of dollars is required.

Differences in repaying debt:

	Credit Counseling Debt Management Plan (DMP)	Debt Settlement Program
Fees	Fees are regulated by state law and are typically less than $75 to enroll and less than $50 per month.	Fees range from several hundred to several thousand dollars.
Credit	Most creditors will re-age past due accounts after 90 days of on time payments through a DMP, improving credit by removing the late payment status on the accounts. In addition, on time payments through a DMP help improve credit. Some potential lenders view accounts on a DMP as a negative. However, many do not. The DMP notation is not included in FICO scoring.	No payments are immediately made to creditors. Instead payments to the debt settlement company accumulate until enough money has been collected to make a settlement offer. Creditors continue to report accounts late and most accounts go into collection, which can be severely damaging to your credit
Collections	Once payments are made to creditors on a DMP, the account is being paid as agreed and any collection activity ceases.	Most debt settlement companies do not offer help with collection activity that will continue while payments are accumulating. Many creditors may opt to sue consumers in court to attempt to collect debts.
Taxes	Because the debt is repaid in full, no tax consequences exist on a completed DMP.	The IRS considers forgiven debt in excess of $600 to be income. For settled accounts, income taxes must be paid on the difference between what was owed and what was paid.

Founded in 1993, Association of Independent Consumer Credit Counseling Agencies (AICCCA) is a national membership organization, established to promote quality and consistent delivery of credit counseling services. AICCCA and its members are focused on improved creditor relations, efficient processes and advanced technology to best serve clients and creditors. AICCCA members are independent nonprofit agencies that advocate for debtors, counsel millions of consumers annually nationwide and provide debt management services to consumers with excessive unsecured debt. For more information or to contact an AICCCA member office call 866-703-TRUSTAICCCA (866-703-8787) or visit www.aiccca.org.

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