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What is credit counseling?

If you struggle to pay your bills in Florida due to large amounts of debt and would prefer to avoid bankruptcy, you may have received recommendations to seek help in the form of credit counseling. Credit counseling may help, but only to a certain point. 

According to the Consumer Finance Protection Bureau, a credit counselor is usually a part of a non-profit organization. Fees for services are usually minimal, and the organization may waive them depending on your financial situation.

However, do not go into an initial credit counseling session expecting immediate relief. The first session usually consists mostly of an assessment of your situation and recommendations for money management and budgeting. A credit counselor will likely ask you questions about your finances and suggest areas where you can cut back on your spending. If you still need help, he or she may suggest follow-up sessions. 

Depending on your situation, a credit counselor may offer to put you on a debt management plan, although there is no guarantee that you will receive such an offer. A debt management plan from a credit counseling organization does not seek to reduce the amount you owe. Rather, your credit counselor seeks to extend the amount of time that you have to pay off your debt and potentially negotiates lower interest rates as well.

In these ways, a debt management plan from a credit counselor may reduce the amount of each of your monthly payments. At that point, instead of making multiple monthly payments to multiple creditors, you submit one payment per month to the credit counseling organization, which then distributes the appropriate amount to each of your creditors. 

Credit counseling can be valuable up to a point but is of little help if you do not have enough income to pay what you owe. In this instance, you may need to pursue another means of debt relief. 

The information in this article is not intended as legal advice but provided for educational purposes only.

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