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What Is Debt Relief Counseling?

By Amanda R. Bell
Updated May 17, 2024
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Debt relief counseling is a type of program that aids individuals and families in reducing or eliminating their debt and building up their credit, and is typically offered by several different organizations, both for-profit and non-profit. A certified counselor looks over and discusses income, expenses including debt, and future financial goals with individuals and families. He or she will also typically help clients develop a detailed monthly budget, including plans for repaying the debt.

This type of counseling is a form of debt relief aimed at helping people pay back their debt, whether it is from credit cards, loans, or medical bills, among other kinds. In general, it is considered ideal for those who have any range of debt, from large to small, and can help individuals and families better manage their finances and improve their economic future. Debt relief counseling is offered by several different dedicated debt relief agencies, government agencies, banks, and certain insurance companies. Services may be free or agencies may require payment.

The first part of debt relief counseling is a session with an experienced debt counselor. Individuals or families will provide the counselor with all of their financial information, including all sources of income, set bills, and estimated monthly expenses, as well as their current debt and the required monthly payments. The counselor and client will also discuss the clients' future financial goals, including how quickly they wish to pay off the debt and any large purchases they plan to make in the future.

Once the counselor has a good idea of his or her clients’ financial situation, he or she will begin to work with them to develop a short-term and long-term plan for improving the situation, namely paying down debt. In many cases, debt relief counseling includes aiding clients in reducing their overall spending, suggesting cuts in monthly expenses, and implementing overall money-saving tips. The counselor will also help clients to understand how much money will have to be paid back on the debt each month to have the amount paid off by the goal date.

At the end of the debt relief counseling session, the counselor will likely work up a detailed monthly budget that includes all of the necessary expenses. This will also include payments to creditors and, in many cases, the counselor will offer advise about setting up a savings account for future goals or emergencies. Following the initial debt relief counseling session, a counselor will typically check in with clients to see how they are doing with sticking to the budget, and provide any advice or suggestions as they work towards paying off the debt and becoming more financially secure.

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