Credit counseling is an effective way to get out from under a mountain of debt. There are two types of debt counseling firms, one is a profit making company and the other is a not for profit organization. Both offer the same services, which are advice to creditors and options to resolve pressing credit situations. The options that they propose may range from making informal arrangements with creditors to debt consolidation to recommendations of declaring bankruptcy. All of these suggestions will be based on the individual case and the depth of the debt problems.
The major differences between for profit and not for profit debt counseling services are in the fees they charge, the range of services they provide in-house, and the experience of their staff. Generally speaking not for profit organizations are cheaper but for profit companies tend to have more qualified staff. The end product will likely be very close regardless of which type of organization you choose. The important thing in debt counseling is to be honest and provide all of the necessary information at the very beginning of the process. There are no secrets in the credit industry and if you have changed addresses or even names your credit history is likely to follow you. By being upfront with your debt counselor they can more quickly bring you closer to a resolution of your credit and debt problems.
After your initial interview with your credit counselor they will prepare a report for you that outlines your current credit rating, which is your ability to borrow and under what conditions and interest rates, and starts the process of laying out options for you to consider. If it is still possible for you to get additional credit, or negotiate a debt consolidation loan from a bank or other lending institution, then they will help you arrange that. More likely than not the recommendation will be bankruptcy protection or formal debt consolidation. If you have absolutely no ability to repay the monies owed in either the short term or over a long period of time then personal bankruptcy may be your only option. In that case the debt counselor will help you get organized for that process.
But most people want to repay their debts and just need a little more time to do that. Debt consolidation can help make that happen and it involves a negotiation process with your creditors so that they will accept something less than full payment in order to relieve you of your debt to them. Your debt counselor will look after all of that for you and after a period of months of years you will once again enjoy a positive credit rating.
One thing that people need to be aware of when it comes to credit counseling is there is about an 80% failure rate of people never actually completing the program, because if you fall behind just one month and miss a payment the credit card companies can kick you off the program. You need to be very sure of your income stream and that it will not be interupted during the program before you enroll.