Not too long ago, I found myself in so much debt I didn’t know how to begin to deal with it. I didn’t feel comfortable asking anyone in my family or social circle for help, even though I knew I needed some backup to allow me to look at my situation objectively. So I called a debt counselor.
It’s an option we’ve mentioned on Lifehacker before, especially as a better alternative to scammy debt-relief companies that promise to boost your credit score overnight. But if you’ve never called a debt counselor (sometimes called a credit counselor) for help, it can be difficult to know what to expect. And look, you’re already worked up about your financial situation—the last thing you want is to add more stress and uncertainty into your life.
To be honest, I can’t remember much that is useful about my own experience getting counseling—that period in my life is sort of a blur. So I called Katie Bossler. Bossler has worked at nonprofit GreenPath Financial Wellness since 2003. She’s a quality assurance specialist with 12 years of experience as a counselor.
If you’ve never spoken with a debt counselor before, here’s Bossler says you can expect.
The basics of your first meeting
The easiest way to find a counselor is by calling the National Foundation for Credit Counseling or use its online intake form. They’ll connect you to a nonprofit counseling organization (like GreenPath, for one). You may speak with someone at an organization located near your home, or someone based across the country. If it’s nearby, you may be able to schedule an in-person meeting, although phone meetings are also common.
Your meeting should be offered at low cost or be completely free.
You’ll start by telling the counselor a bit about your situation and sharing your primary concerns. “We’re going to take the time to understand that person’s specific financial concerns, or even financial goals,” Bossler says. Her clients have a variety of reasons for getting help, she explains, ranging from credit card debt to student loans to optimizing their budgets. “We’re really trying to help understand what that person wants their financial life to look like and what their financial goals are.”
The numbers
The counselor will, with your permission, pull your credit report to get a better look at your debt. (Don’t worry: It’s a “soft pull,” so it won’t impact your credit store.) Once the counselor confirms your accounts are accurate, you’ll provide more information about your income and monthly expenses. Being able to look at all that information together helps the counselor formulate a plan with you.
If that feels like a lot, well, it’s probably because it is. “It’s really hard to open up to somebody over the phone and to divulge your financial life to them,” Bossler says; for many of her clients, it’s the first time they’ve voiced their financial concerns aloud to someone. Sometimes, it’s an emotional experience: “For a lot of people, it’s a really big moment, and we know that,” Bossler adds.
She notes that a debt counselor will only do what someone is comfortable with, so if you have concerns about a certain aspect of your financial situation, be sure to express that to your counselor.
Once your counselor has a clear picture of your financial situation, they’ll provide options for steps you can take to improve it.
Next steps
Your counselor’s recommendations may include a debt management plan—more on that in a moment. They may also talk about options to settle your debt or file for bankruptcy. Or they may advise you to manage your debt on your own, providing some strategies or resources to lighten the burden a bit.
Bossler compares it to going to the doctor for a physical. Your doctor will make recommendations based on the information they gather from your medical history and exam, but unless there’s an obvious emergency, they’re only going to present you with options to consider as you more forward, rather than a clear course of action. It’s up to you to choose the path you prefer.
“We help the consumer think through what options are realistic based on their finances, based on their credit score, based on what their budget can afford, and help them develop a strategy to tackle the debt,” Bossler says.
Debt management plans
Credit counseling agencies offer debt management plans (DMP) as a way to simplify your debt into one payment. The agency works with your creditors to set up an agreement, which may include a lower interest rate or an extended repayment timeline. Then, instead of making payments each month to all your separate debt accounts, you’ll make one payment to your debt management plan.
Your counseling organization will handle all the communication with your creditors for you, which can provide peace of mind if you’re feeling particularly stressed. “If someone’s feeling completely depleted making those phone calls, or overwhelmed by what’s coming to them in the mail, those are common reasons that somebody will choose a debt management plan,” Bossler says.
All the money you pay goes directly toward your debts, but there may be costs to use such a program. There’s often a setup fee of up to $75 and an ongoing monthly fee of between $25 and $75.
You shouldn’t feel pressured into enrolling in a DMP right away. Your counselor can estimate how much faster you’ll get out of debt by having interest rates or payments reduced instead, and can also project how setting one up might affect your credit score. “A good credit counseling agency will help understand how that decision is going to impact your credit,” Bossler says. “You’ll walk away with a full picture of the pros and cons so you can make that choice.”
It goes beyond your score too—a good counselor will show you how choosing a DMP or any other actions for managing your debt could impact your overall financial goals.
If you do enroll in a debt management program, you can expect to be able to access information about your plan online as well as have access to a support team by phone.
Keep in touch
For some, a single hour-long phone call and a few quick followup emails might be all you need to feel organized and ready to take action to conquer your debt. But you may find that speaking with your counselor regularly can help you stay motivated and encourage you to adapt your strategies more quickly if your financial situation changes.
“We know that financial health is not always linear,” Bossler says. “There’s always a fix. It’s not always the fix you want, and it’s not always the silver bullet that you want, but there’s always a fix.”
Have you worked with a counselor to get your debt under control? Share your experience in the comments—I’d love to know about your results.
