Financial Credit Counseling

Financial credit counseling comes in different forms, depending on the severity of your debt management situation. Professional credit counselors can help with mild to moderate problems, while court-mandated financial counseling is required for issues bad enough to drive you into bankruptcy. Counseling is usually voluntary, but it is legally required in certain circumstances.

Voluntary Credit Counseling

Voluntary credit counseling is available through non-profit firms to anyone having financial problems. Credit counseling companies have trained professionals to talk to you about your debt management issues and help you formulate a plan. Sometimes counselors recommend budgeting or financial classes, or they may suggest a formal debt repayment plan for situations that are beyond simple solutions. Credit counselors should not get commissions for pushing you to use certain services, and legitimate firms should get the bulk of their financing from creditors rather than clients, according to the Better Business Bureau (BBB).

Pre-Bankruptcy Counseling

Anyone wishing to declare bankruptcy must go through financial credit counseling with six months before filing her case, according to the Federal Trade Commission (FTC). You must choose a government-approved counseling firm that supplies a completion certificate for the court. The 90-minute counseling session usually costs about $50, but government-approved providers must waive the cost if you cannot afford it. It focuses on bankruptcy alternatives to ensure you know your options before proceeding with a court action that badly damages your credit rating.

Post-Bankruptcy Counseling

The law requires you to go through financial counseling before your bankruptcy case is complete to prepare you for the credit-rebuilding process. You can only file for Chapter 7 bankruptcy once every eight years, so the counseling helps you avoid reaching a desperate point again. The FTC advises that post-bankruptcy financial counseling last about two hours, with fees ranging between $50 and $100. Government approved counselors must waive the fee if you cannot pay. The counseling firm provides a certificate for the course so your bankruptcy can be finalized.

Considerations

Not all credit counseling firms are legitimate, even if they have non-profit status. The BBB advises finding a financial credit counselor through the the National Foundation for Credit Counseling or Association of Independent Consumer Credit Counseling Agencies when you are seeking voluntary help. Members of these professional groups adhere to certain quality standards. Ask about the counselors' training and the firm's licensure and request a full disclosure of fees before agreeing to work with a company. Be suspicious of credit counselors who make exaggerated promises, like total elimination of your debt within an unrealistic time frame.