Contact us for a free credit counseling session to determine if you qualify for a debt management plan.
There are also legal and technical issues a counselor can help with. The typical consumer can’t be expected to know all of the ins and outs of mortgage refinancing regulations, or terms of various consumer protection laws. A counselor should be knowledgeable enough to answer a client’s questions about these issues.
We teach consumers how to better manage their personal finances, pay down debt, and save for the future. For many of us, though, sound advice and education don’t go far enough—we have questions, we run into obstacles, and we need extra help to succeed. That’s where debt counseling can help.
Forms of Debt Counseling
There are almost as many different kinds of counseling as there are different kinds of debt. And even within the different kinds of debt counseling, each debtor has unique circumstances that require different solutions and advice. That’s another advantage counseling offers over a centralized source of guidance; even the most knowledgeable debt relief guru can’t help every debtor individually like a debt counseling agency can
The most common form of debt counseling is probably credit counseling-credit card debt is extremely common and easy to acquire. It’s also designed to take decades to pay off these debts, so many consumers find themselves in need of debt counseling services.
HUD-approved housing counselors help with more than mortgage debt. They provide advice to renters, people looking to buy their first home, and senior citizens who could benefit from reverse mortgages. Housing counseling helps homeowners avoid foreclosure by seeking loan modifications, short sales, and taking advantage of government programs.
By law, anyone seeking to declare bankruptcy must seek counseling before they file. They then must complete an education course before their debt is discharged. Any counseling organization that wishes to provide these services must be approved by the EOUST (Executive Office for US Trustees) to provide pre-bankruptcy counseling & education. This EOUST approval doesn’t endorse or assure the quality of an agency’s services.
PLEASE NOTE: While Springboard is approved by the EOUST to provide bankruptcy counseling & education, we do not offer any legal advice or services. We urge anyone seriously considering bankruptcy to seek the services of a qualified attorney in addition to the required pre-bankruptcy counseling.
Since student loans are not dischargeable in bankruptcy and usually carry favorable terms, the best thing counselors can usually do for student loan debtors is help them address their other debts and financial obligations, freeing up income to apply to student debt payments. There are some student loan relief options like deferments, forbearance, and the government’s Income Based Repayment Plan that can help student loan borrowers. A knowledgeable counselor can direct these borrowers to the appropriate remedy.
Mental Health Counseling
Some people with severe compulsive spending issues may need to seek professional psychological counseling in addition to debt counseling to help them pay off their debts. For these individuals, it is important to address the root causes of their spending problem, or the relief provided by debt counseling may not be permanent. Some people feel hopelessness and despair when they face large debts and should seek professional mental health services if they feel they may be danger to themselves. (See “Don’t Let Credit Debt Turn To Tragedy.”)
This is a 12-step program for compulsive debtors. It applies the principles and methods of programs like Alcoholics Anonymous to people who cannot stop acquiring unsecured debts. Designed for those with very serious spending issues, Debtors Anonymous offers ongoing group support with local meetings in over 500 different locations.
Advantages of Debt Counseling
Professional one-on-one counseling that addresses debt issues is confidential. As long as the debtor uses a credentialed counseling organization, consumers can feel secure that they’re getting the best possible service. (See “How to Know if a Credit Counseling Agency is Legitimate.”
Using a counselor means getting personalized advice and guidance that you can’t get from a web site, book, or radio call-in show. Only a certified counselor will take the time to understand your unique situation and offer you assistance that is targeted to your circumstances.
Another big advantage is that counselors are non-judgmental and professional. Debt counseling has been around for over 50 years; experienced counselors have seen more different kinds of circumstances than you can imagine, and they know that criticizing or judging their clients is not a worthwhile counseling strategy.
Counselor certification is another big advantage of debt counseling. A knowledgeable, trained and experienced counselor will have answers to your questions and advice based on their expertise and personal experience as a counselor. You might find people sympathetic to your situation that will happily offer advice, but a true debt counselor will have the professional credentials needed to offer sound guidance.
In many cases, such as credit counseling and most forms of housing counseling, services are offered free of charge. Some kinds of counseling, like pre-bankruptcy counseling and reverse mortgage counseling, may carry modest fees, but these fees are regulated and capped by law, so the client pays as little as possible, and any given agency will not typically charge higher fees than another.
Alternatives to Debt Counseling
Dealing with Creditors
Creditors may be able to offer some concessions if you call them and express a concern about repaying your debts. They may be willing to lower your minimum monthly payment to help you avoid missing a payment. Some creditors even refer their customers to credit counseling if they think it is necessary. While it can be a good idea to reach out to your creditors if you are facing financial difficulties, they can only help you with one account. Debt counseling looks at your entire fiscal picture, all of your debts and expenses, and helps you come up with a solution for every aspect of your financial life.
Dealing with Collectors
Collection agents may propose payment schedules and payoff plans to collect on debts you owe, but their only objective will be to collect the money owed to them, not to help the consumer make the best decisions. Collectors are notorious for calling debtors constantly, making threats, and in some cases violating the Fair Debt Collection Practices Act. A debt counselor can help you understand your options and deal with collection accounts without being bullied, threatened or judged.
Loss Mitigation Departments
If you are concerned about being able to repay your mortgage, you should talk to the loss mitigation department of your mortgage lender. Since mortgage debt is so much larger than typical revolving debts, they make every effort to work out solutions with their borrowers. Any responsible loss mitigation specialist will probably refer you to HUD-approved housing counseling. Even while receiving HUD housing counseling, it’s good to keep the lines of communication open with your lender.
A debt settlement is when a borrower settles a debt for less than the full amount owed. The lender must agree to accept less than the full amount, and this arrangement is indicated on the borrower’s credit record. Usually, people use the services of a professional debt settlement negotiator; in some rare cases, this negotiator may also be certified as a debt counselor. (See “6 Things to Consider Before Using a Professional Settlement Negotiator.”)
Any consumer facing overwhelming debts will be unlikely to be approved for a debt consolidation loan, but some services offered by debt counselors include consolidated monthly debt payments, which confers the advantages of debt consolidation along with the benefits that come from professional counseling services. Even those consumers who are able to get a consolidation loan or consolidate their debts through balance transfers could benefit from a free debt counseling session, since debt consolidation by itself does not offer the education and assistance a counselor provides.
Debt counseling includes a wide variety of services designed to help consumers better manage their finances and address many different kinds of debt. As long as consumers seek the assistance of legitimate nonprofit counselors who are properly certified, there is no risk to the consumer. Part of the initial counseling involves determining what solutions would help a particular client in their particular situation, so a debt counseling session is a great place to start for those who have any concerns about repaying their debts.