When insurmountable debt becomes a problem, there are several options that may help resolve it. Bankruptcy, debt consolidation or debt management are possible answers. One aspect of debt management is Credit counseling.
Credit counseling maybe the right solution if you would like to pay off your debts by continuing to make payments to your creditors based on what you can afford. Obviously, your inability to pay your current creditors is because your debt is greater than your budget. By breaking down your payments into smaller amounts, the money you have budgeted will cover those bills.
What credit counselors do is to help you take a new look at your budget and help you determine whether you are spending your money on the right priorities. For example, your home is probably more important to you than your sailboat. But if your budget and income can’t cover both payments, a credit counselor can advise you about whether you may need to sell your boat.
Another option they offer is to keep your sailboat and your home, but to pay a smaller amount each month on your sailboat, while continuing to pay the same amount on your home mortgage. Credit counselors can contact all of your creditors (everyone you owe money to) and work out a payment arrangement with each one of them, based on what you can afford to pay.
This is NOT a loan as would be used in another type of debt relief. Debts are not paid off with a loan that then requires new payments, and probably higher interest.
Credit counseling helps you re-align your budget, and will negotiate smaller payments with your creditors until you debt is paid off. Credit counselors set up a plan that allows you to make one payment per month to the Credit counseling service, and then they pay all of your bills by distributing that monthly payment to all your creditors.
Credit counseling services have relationships already set up with major creditors and have agreements with them to set up these arrangements so you don’t have to do it on your own. In most cases these services are free to the debtor/client and creditors pay the credit counseling service for helping them collect the debt.
Of all the debt relief plans available, using Credit counseling is the least expensive way for a debtor to get out of debt quickly.