Credit Counseling Alternatives

Credit counseling teaches you to manage your debts on your own or gets you into a formal payment plan, depending on your specific needs. Many credit counseling firms are nonprofit and offer free or affordable services. You have other alternatives if you do not wish to work with a credit counselor, ranging from self-help to bankruptcy, according to the Federal Trade Commission.

Self-Help

You can get out of debt with a self-created repayment plan if your financial problems are not too severe. Cut back on unnecessary expenses, like restaurant meals, movies and expensive vacations, and put all the money you save on your bills. Focus first on the accounts with the highest interest rates, so more of your funds get applied to the owed balance rather than just the interest charges. This approach preserves your credit rating because the on-time payments and reduced debt amounts both help your credit score.

Temporary Arrangements

Creditors will sometimes work out temporary arrangements with your payments to get you through a rough spot. For example, banks sometimes lower your car payment or extend the payback time frame, Cars Direct explains. Mortgage companies sometimes give you a holiday of a month or more, although Jane Baker of LoveMoney.com warns that you still accrue interest on that amount. Call your creditors as soon as you start having problems, because some will not help you if the loan is seriously delinquent.

Debt Settlement

Your creditors may be willing to work with you on debt settlements for less than you actually owe. Contact your credit card issuers and other lenders and explain your financial situation. These companies often accept a reduced amount rather than face the prospect of getting no payment at all if you default or file bankruptcy. Debts settlement companies ofter to do the negotiation process for you, but many exaggerate their success rates and do little or nothing to earn their fee, "USA Today" Your Money columnist Sandra Block warns. Settlement hurts your credit rating because credit bureau files show that you did not pay the full owed balance, which counts as a negative entry. This information falls off your report automatically in seven years.

Bankruptcy

Bankruptcy gets you out of paying some or all of your bills, but you may have to sell off most of your assets and your credit reports show the bankruptcy for 10 years, the FTC explains. A Chapter 7 filing relieves you of most debts and forces sale of much of your property, while Chapter 13 makes a repayment plan and lets you keep the majority of your possession. Federal law forces you to go through one pre-bankruptcy counseling session and one financial management class before your case gets discharged.