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Definition
Credit counseling is guidance from a usually nonprofit agency that helps you build a budget and create a plan to repay your debts. Counselors review your income, expenses, and balances, then suggest options that may include a Debt Management Plan (DMP), where you make one monthly payment that the agency distributes to your creditors. Agencies affiliated with the National Foundation for Credit Counseling (NFCC) are a recognized standard for quality and nonprofit status. Credit counseling also plays a legal role: pre-bankruptcy credit counseling from an approved agency is required before you can file. Sessions are often free or low-cost, and a reputable counselor will explain the tradeoffs of each option rather than push a single product. Results vary based on your debts, budget, and which creditors agree to participate.
Also Known As
Consumer credit counseling
Debt counseling
Nonprofit credit counseling
NFCC counseling
Used in Context
- After falling behind on several cards, you scheduled a free credit counseling session to see whether a Debt Management Plan made sense.
- Before filing Chapter 7, you completed the required pre-bankruptcy credit counseling from an approved agency to satisfy the court.
- A consumer who matched through Dreamy Leads was steered toward NFCC-affiliated credit counseling instead of a high-fee debt product.
Is credit counseling required before bankruptcy?
Yes. Pre-bankruptcy credit counseling from an approved agency is required before you can file. You typically complete it within a set window before filing, and the agency provides a certificate. The session reviews your finances and any alternatives to bankruptcy you might consider.
How do I find a trustworthy credit counseling agency?
Look for nonprofit agencies, especially those affiliated with the National Foundation for Credit Counseling (NFCC), which is a recognized standard. A reputable counselor explains your options, including a Debt Management Plan, without pressuring you into a single product or charging high upfront fees.
What is a Debt Management Plan?
A Debt Management Plan (DMP) is an option a credit counseling agency may offer where you make one monthly payment that the agency distributes to your creditors. Terms and any reduced rates depend on which creditors agree to participate, so outcomes vary by your specific situation.
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