Credit Counseling: Nonprofit Debt Help

Why it matters

Reputable credit counseling is usually low-cost or free for the first session. Legitimate agencies are typically nonprofit. Before filing bankruptcy, federal law generally requires a credit-counseling course from an approved agency. You also need a debtor-education course before discharge.

Outside of bankruptcy, a counselor can help build a budget. Where it fits, the counselor may also set up a debt management plan with creditors. Counseling is education and support, not legal advice. It doesn't stop a lawsuit or erase debts. People comparing counseling with other paths sometimes also weigh settlement or bankruptcy, since each option has different trade-offs.

Example

Feeling overwhelmed by card balances, Tomas meets with a nonprofit credit counselor. She reviews his budget for free. She lays out several options, including a debt management plan that would consolidate his payments. She also explains that counseling alone won't stop collection efforts. Tomas uses the session to understand his choices. Later, he researches bankruptcy. He learns he'd first need an approved credit-counseling course from a U.S. Trustee-approved agency.