Understanding How Credit Counseling Works


When a person has found his or herself in financially burdensome situations, it can be advantageous to take part in credit counselling. This type of counseling can many times help a person avoid having to file bankruptcy. Even though bankruptcy does have its advantages, because it can completely eliminate a person's debt, it also has very negative consequences on a person's credit history. In fact, it can stop a person from being able to obtain an auto loan, home loan, and much more. It can even stop a person from obtaining certain types of jobs. This is why credit counselling can be so beneficial.

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Knowing When to Obtain Credit Counseling

Most times, a person will realize that he or she needs to partake in debt counselling because he or she cannot repay debt obligations. For example, maybe a debtor is able to make minimum credit card payments, but is unable to afford his or her mortgage payment. This type of situation is one in which obtaining counseling related to credit could be very beneficial. If a person has collection agencies calling, or is involved in legal actions related to his or her debts, it is usually best to obtain credit counseling.

Avoiding Bankruptcy

While many bankruptcy attorneys will advocate that debtors file bankruptcy, many times, this is only so the attorneys can collect a fee for the services that they offer. For many debtors, taking part in debt counseling can help them resolve their debts, all the while helping them to avoid having a bankruptcy reflect on their credit history. It is important to keep in mind that a bankruptcy can stay on a person's credit history for anywhere from seven to ten years.

Understanding the Counseling Process

When taking part in credit counselling, a debtor should bring all important documentation relating to his or her debts. An advisor at the counseling session can then review the debts and make appropriate suggestions as to the exact type of counseling that the debtor would benefit from. A credit advisor can also work with a debtor's creditors to come up with appropriate negotiations as to how and when the debts can be paid off. Many times, the advisor can work out deals with creditors so that a debtor only has to pay a portion of what he or she actually owes; the rest of the debt is completely forgiven.

Understanding Credit Options

A debtor never knows his or her credit options until taking part in credit counseling. Many debtors are unaware that there are many debt repayment options for them to take advantage of. By taking part in credit counseling, debtors can be informed of the different options, and they can also work with a counselor so that the most appropriate option can be chosen.

Everyone Can Benefit from Debt Counseling

It is important to remember that good people often become entangled in financially burdensome situations. Even if a person tries to make good financial choices, sometimes life throws things in the way that makes a person unable to repay all his or her financial obligations. Keeping this in mind, all debtors will greatly benefit from remembering that credit counseling is available to all people who are having financial problems.


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