Debt Counseling: Make it Work for You

UpdatedJun 22, 2025
- Debt counseling offers a wide range of services, including advice on debt management, budgeting, and money management.
- Debt counseling is helpful to those who have difficulty paying debts like credit card bills and monthly loan payments.
- The debt counselor will suggest action steps and strategies you can pursue to improve your debt and credit.
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Are you worried about mounting debt and its effect on your credit? Can't seem to make traction on the money you owe creditors? Perhaps it's time to enlist the help of an expert in the form of a debt counseling service.
Debt counseling offers a wide range of services, including advice on debt management, budgeting, and money management.
Take the time to learn more about debt counseling services. Learn about the benefits they provide before committing to a particular resource for debt relief.
Be prepared to ask any debt counseling organization questions and research them online before enrolling in a program.
What is debt counseling?
Debt counseling is a service that aids consumers experiencing debt, credit, and money challenges.
Credit counseling services, often nonprofit organizations, first scrutinize your financial situation. They can provide recommendations, guidance, and helpful resources to help manage your debt.
Debt counseling is helpful to those who have difficulty paying debts like credit card bills and monthly loan payments.
Many folks who benefit from debt counseling experts have high-interest debt that they have not been able to manage correctly on their own.
What are debt counselors?
Credit counseling organizations are staffed with trained and certified counselors.
They are experts in debt and financial management, budgeting, consumer law, and consumer credit, according to the Consumer Finance Protection Bureau (CFPB).
When you enlist a credit counseling service, one or more professionals will be assigned to your case. First, they analyze your financial situation. Then they attempt to guide you in devising a customized strategy to manage your debt and credit problems better.
How is debt counseling different from credit counseling?
Debt counseling is simply another term for credit counseling.
Although they mean the same thing, when searching for help, credit counseling is more commonly used.
Types of Debt Counseling Services Available
A worthy debt counseling organization can provide several different valuable services, including:
Thoroughly reviewing your financial picture and determine areas of concern.
Helping you obtain three free credit reports (available from Experian, Equifax, and TransUnion). Explaining how to interpret them. Helping get a copy of your credit scores.
Recommending best practices for managing your debt and your finances.
Aiding you in creating a realistic, workable budget.
Providing no-charge workshops and educational resources.
Safeguarding and/or rebuilding your credit.
Communicating with collection agencies and lenders by passing or handling debt-related repossessions and lawsuits.
Deciding if bankruptcy is a worthy option as a last resort.
Organizing a debt management plan (DMP) to assist you in paying down what you owe.
A major benefit that a debt counseling organization offers is helping you comprehend your credit scores. They can help you find ways to improve your credit.
How the Debt Management Plan (DMP) Works
The goal of a DMP is to negotiate with your creditors to lower your interest rate. They will also attempt to get fees waived, extend your repayment terms, and bring past-due accounts current.
With a DMP, you deposit one simple payment monthly into a special account with the help of the debt counseling organization. Typically, the length of the program is five years.
They pay your separate credit card bills and other debt obligations based on a pre-arranged payment schedule.
You may be obligated to close certain credit cards or accounts, too. But the debt counseling service will typically not arrange any reduction in the amounts you owe.
The debt counseling organization you pick should not pressure you into a DMP as your sole strategy. A DMP should be offered as a possible option you are not required to pursue.
How to find a debt counselor
You can find a debt counselor/debt counseling organization by searching online. Also, ask trusted friends or family for referrals to organizations they have worked with.
To locate a reputable debt counselor, check with industry sites. Some examples are the National Foundation for Credit Counseling, the Financial Counseling Association of America, the U.S. Trustee Program, and the American Association for Debt Resolution (AADR).
But don't stop there. Take the time to vet any potential debt counseling organization with your state consumer protection agency, state attorney general's office, and the Better Business Bureau.
How to pick a debt counselor
Before choosing the right debt counseling service, ask these questions.
Is in-person counseling available?
What fees are charged by the organization? Do you charge set-up and/or monthly fees? (Get any particular price quotes in writing.)
What if I cannot afford to pay the fees or make contributions?
Does the organization contract with consumers or provide a formal written agreement? (Be sure to read everything before signing anything, and request that all verbal promises be written.)
Does the organization offer free educational materials?
Is the organization properly licensed to offer services in your state?
What are your counselors' qualifications? Are they certified or accredited by an outside organization? If so, by whom? If not, how are they trained? (Try to choose an organization whose counselors are trained by a non-affiliated party.)
How are the organization's workers paid? (If employees are compensated more after you enroll in particular services or pay a fee, it's best to look elsewhere.)
In addition to helping me solve my immediate problem, will you assist me in devising a plan to avoid future problems?
What guarantee can you give me that my personal information will be kept secure and confidential? Especially my address, phone number, and financial information.
Ask for information about the company. A counseling organization should send you information about it and its services, free of charge. If they don't, it's best to choose a different debt counseling service.
Avoid committing to any program or agreement you are not clear on. Make sure that you understand the rules and fees involved.
Note that "non-profit" status doesn't guarantee that services are no-charge, affordable, or legitimate, cautions the FTC.
Some debt counseling organizations bill exorbitant fees that they may not disclose upfront. Others could urge you to make "voluntary" contributions that can trigger further debt.
What happens next
Once you enlist with a debt counseling service, you will likely have to download and sign a counseling agreement form.
You may need to provide a completed worksheet that indicates your earnings, assets, expenses, and liabilities.
Be prepared to consult with a debt counselor by phone, online, or in person. Your first counseling session may last an hour or longer. Your counselor will inform you of your responsibilities and rights.
The debt counselor will suggest action steps and strategies you can pursue to improve your debt and credit.
Debt relief by the numbers
We looked at a sample of data from Freedom Debt Relief of people seeking credit card debt relief during May 2025. This data reveals the diversity of individuals seeking help and provides insights into some of their key characteristics.
Credit utilization and debt relief
How are people using their credit before seeking help? Credit utilization measures how much of a credit line is being used. For example, if you have a credit line of $10,000 and your balance is $3,000, that is a credit utilization of 30%. High credit utilization often signals financial stress. We have looked at people who are seeking debt relief and their credit utilization. (Low credit utilization is 30% or less, medium is between 31% and 50%, high is between 51% and 75%, very high is between 76% to 100%, and over-utilized over 100%). In May 2025, people seeking debt relief had an average of 74% credit utilization.
Here are some interesting numbers:
Credit utilization bucket | Percent of debt relief seekers |
---|---|
Over utilized | 30% |
Very high | 32% |
High | 19% |
Medium | 10% |
Low | 9% |
The statistics refer to people who had a credit card balance greater than $0.
You don't have to have high credit utilization to look for a debt relief solution. There are a number of solutions for people, whether they have maxed out their credit cards or still have a significant part available.
Collection accounts balances – average debt by selected states.
Collection debt is one example of consumers struggling to pay their bills. According to 2023, data from the Urban Institute, 26% of people had a debt in collection.
In May 2025, 30% of debt relief seekers had a collection balance. The average amount of open collection account debt was $3,203.
Here is a quick look at the top five states by average collection debt balance.
State | % with collection balance | Avg. collection balance |
---|---|---|
District of Columbia | 23 | $4,899 |
Montana | 24 | $4,481 |
Kansas | 32 | $4,468 |
Nevada | 32 | $4,328 |
Idaho | 27 | $4,305 |
The statistics are based on all debt relief seekers with a collection account balance over $0.
If you’re facing similar challenges, remember you’re not alone. Seeking help is a good first step to managing your debt.
Support for a Brighter Future
No matter your age, FICO score, or debt level, seeking debt relief can provide the support you need. Take control of your financial future by taking the first step today.
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Author Information

Written by
Erik J. Martin
Erik J. Martin is a Chicago area-based freelance writer whose articles have been published by AARP The Magazine, The Motley Fool, The Costco Connection, USAA, US Chamber of Commerce, Bankrate, The Chicago Tribune, and other publications. He often writes on topics related to real estate, personal finance, business, technology, health care, and entertainment. Erik also hosts the Cineversary podcast and publishes several blogs, including martinspiration.com and cineversegroup.com.

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