What is Consumer Credit Counseling & How Does It Work?

Credit counseling is a resource that often goes underutilized by those who need it most. This service allows you to get information about your debt and the best way to budget for it, all for a very low cost. For those who are interested in filing for bankruptcy, credit counseling is a required step of the process. 

When you file for bankruptcy, you must take two credit counseling courses. The first course must be completed before filing and shows more information about your debt and budget. The second course must be taken after bankruptcy and proof of participation must be sent to the court in order to get your debts discharged. Since this is a required step of bankruptcy, many wonder what they’ll learn during their credit counseling. 

Ready to learn more about credit counseling? Let’s dive in. 

What is credit counseling?

Credit counseling at its core is a service that teaches you about your debt and how to best manage it. Credit counseling sessions are led by financial professionals in-person, over the phone or online. Information covered in sessions includes: 

  • Advice on how to best manage your money 
  • Budgeting guidance
  • Details about your credit report and debt 
  • Resources and tools to assist you with 
  • Creating a debt management plan 
  • Going over next steps to improve your finances 

Note that credit counseling agencies and debt relief companies are very different. Don’t make the mistake of seeking out a debt relief company when you really mean to look for credit counseling. Debt relief companies often claim to work with you to help settle your debt, however many of these companies can be scams. In fact, many creditors won’t work with debt relief companies. This is another reason why it’s vital for you to check with your local BBB before choosing a company. 

How do I choose a credit counselor?

Choosing a credit counselor isn’t as easy as going to the first person you find on Google. In order to get a credit counselor who’s looking out for your best interests, you’ll need to do some deeper research. First, you’ll want to check that your credit counseling agency is aligned with the National Foundation for Credit Counseling — this is the largest, most-trusted agency that houses member credit counseling agencies. You also want to make sure the agency is in good standing with the Better Business Bureau. Once this is verified, you can add this agency into your consideration. 

When you sit down with your credit counselor for the first time, you should come prepared with a list of questions. These can include: 

  • What types of services do you offer? 
  • What are your fees? 
  • What are your qualifications? 
  • How many times will we meet? 
  • Do you work with bankruptcy clients? 

How much does a credit counselor cost?

The cost of a credit counseling session varies, though it usually falls around 25-50 dollars. Credit counselors are allowed to charge for their services, but it cannot be unreasonable. If this cost is an issue for you, your credit counselor should work with you on a sliding scale payment. You may be able to receive your session for free if you cannot afford it. 

Are you ready to gain control of your finances?

Contact Reynolds & Gold. Our team of lawyers can assist you with your bankruptcy proceedings. 

A couple going over billings.A woman looks at her credit cards, trying to decide how to pay for bankruptcy.