What is Credit Counseling?
Credit counseling has been around for over forty years. Simply put, it is your opportunity to have an in-depth discussion with a accredited credit counselor regarding your unique financial situation. It is your chance to ask all of your questions in order to obtain a clear understanding of how to get from where you are now – to where you want to be in your financial future.
Credit counseling involves educating consumers about how to avoid incurring debts that cannot be repaid. This process is actually more debt counseling than a function of credit education. Credit counseling often includes negotiation with creditors to establish a debt management plan (DMP) for a consumer. A debt management plan may help the debtor repay his or her debt by working out a repayment plan with the creditor. Set up by credit counselors, debt management plans usually offer reduced payments, fees, and interest rates to the client. Credit counselors refer to the terms dictated by the creditors to determine payment or interest reductions offered to consumers in a debt management plan.
Credit counseling under the Bankruptcy Code is a prerequisite for filing a Bankruptcy Petition. It is simply a one-time class a debtor must attend in person, over the phone or over the internet that assesses the debtor’s financial situation and gives alternatives to filing bankruptcy. Some services also offer helpful financial advice and a budget analysis. The certificate of completion must be obtained before your attorney can file your case. The “credit counseling” class is the class you take before bankruptcy. The second part is “debtor education”. See the next section.
