Debt counseling (alternatively called credit counseling) is a process which aims at getting the clients who go through it - who are typically people deeply steeped in debt - out of the debt, while also (at least ideally) empowering them with the tools to keep themselves from falling into such impossible debt situations in the future. Of course, the second ideal (of empowering people to stay out of debt’s way) is harder to achieve for most debt counseling programs, but for the most part, the services of debt counseling agencies do tend to be helpful in at least getting clients out of the current difficult debt situations they find themselves.
And contrary to what one might imagine on first hearing about it, debt counseling is not a passive counseling process (where information is transferred from the counselor to the client), but rather more of an active intervention to get the client out of the difficult debt - with debt counselors often taking proactive steps such as renegotiation with creditors, aimed at restoring their client’s financial health.
Where debt counseling involves the more direct interventions, a debt management plan is usually first put in place and the plan, with the setting up of such a debt management plan in most cases being followed by renegotiation with the creditors (with regard to the debt repayment schedules, interest rates and so on), a step which, of essence, has to be followed by closure of the client’s accounts with the creditors, so that no more credit is advanced to the client until they have gotten out of their difficult debt situation.
Besides having the debt counselor take proactive steps aimed at getting the client out of debt, most debt counseling clients will typically also be advised to pursue other strategies that can go a long way towards lessening their debt burden, an example of which is debt consolidation - which if well undertaken, can lead to major reductions in interest payments for the debt.
Most debt counseling agencies give their clients the option of either having a face to face consultation or consultation by phone. And with over 1,000 debt counseling agencies operating in the United States alone, there is no denying that the need for debt counseling services in the society is great, as people are always prone to fall into difficult debt situations, sometimes due to no faults of their own (like where a heavily indebted person who was nevertheless managing their debts competently happens to lose their job suddenly).
It is noteworthy that is some jurisdictions, like the United States for instance, debt counseling is actually compulsory for anyone filling for bankruptcy. Noteworthy too, should be the fact that debt counseling services come at a cost - often an hefty one if one is not keen about their choice of a debt counseling service - and that having gone through debt counseling is seen as negative reflection on one’s credit history, and a note of the fact that one has gone through such debt counseling is made to appear in one’s credit report.
Tags: credit score, debt, debt counseling, debt management, debt management plans, debt management programs, Finance