Introduction to Debt Counseling

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.

Beyond just educating clients on how to get themselves out of debt, most debt counseling programs also take more direct interventions aimed at getting their clients out of debt, like for instance renegotiating with creditors on their client’s behalf, with regard to debt repayment particulars such as repayment schedules, interest rates and so on.

An important feature of most debt counseling programs is the debt management plan, whose development is the result of the consultation between the client and the debt counselor with regard to the state of the client’s finances Vis a Vis the debts that the client has. Development of the debt management plan complete, the next step will tend to be the renegotiation with the client’s debtors (by the debt counseling agency mentioned earlier) which in most cases is followed by closure of the client’s accounts with the creditors, a step aimed at preventing the client from falling deeper into debt, as ways of restoring their financial health are sought.

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.

While the face to face contact was traditionally the most preferred mode of delivery of debt counseling services by debt counseling agencies to their clients, there has been a shift towards telephone contact between debt counselors and their clients in recent days, out of the convenience of such phone contact offers and the cost advantages that such phone contact can have, especially in a call center setting.

And debt counseling services have in some countries come to be viewed as important social services, with people filing for bankruptcy in countries like the United States, for instance, having to go through debt counseling first in an effort to find ways to have them repay their debts somehow, and thereby avert the whole bankruptcy thing altogether. And while still at it, it is important to take note of the fact that having gone through debt counseling can be a negative reflection on one’s credit history.