Debt counseling – 10 things you may want to know

Nowadays, people are trying all types of methods to fight the debt that they are carrying. Almost every adult citizen in the United States is carrying some form of financial obligations, and so finding the right tool to battle that financial obligations is of great importance. If you have already tried multiple methods for dealing with your multiple bills and still have not gotten any major positive results, you may find the information below pretty useful.

Ways of dealing with multiple bills

Ways of dealing with multiple bills
Ways of dealing with multiple bills

There are a number of different methods and financial tools that people can use as ammunition in their battle against multiple bills. Different types of debt consolidation and multiple bills repayment strategies and plans have helped many people pay off their multiple bills. However, these are not the only ways to get help when battling debt. Here, we are going to discuss debt counseling, what it is and how it can help you, plus other information that you may want to have.

What is debt counseling?

What is debt counseling?
What is debt counseling?

Debt counseling is a type of a formal legal procedure that allows the credit counselor to have negotiations with the creditors in order to reach an agreement on an improved payment plan, as well as get a court order that confirms the characteristics of that new payment plan. Credit counseling is also a process that allows the consumer to be declared as over-indebted. In order to operate legally, the credit counselor needs to be a registered member of the National Credit Regulator and therefore have a National Credit Regulator number.

Once the consumer has been declared as indebted and has been accepted to have a credit counseling, this is what will happen next:

  • All the consumer’s creditor will be forbidden from calling him
  • The consumer is going to have a protection against legal action from the application day, for a period of 60 days. After all arrangements have been calculated, this is as long as the consumer pays his deeds according to the new payment agreement.
  • The consumer is going to be listed as being under debt counseling in the Credit Bureau.

You need to know that while you are undergoing credit counseling, you will not be able to get any credit, at least until you are issued with a clearance certificate. After you have completed your obligations in line with the Tribunal and Court order and with the National Credit Act, you will be allowed to take credit.

10 things you should know about credit counseling


  • There is no qualification guarantee


There is no qualification guarantee
There is no qualification guarantee

Anyone who wants to apply for credit counseling is free to do so. However, not all applications are going to be approved.

In order for you credit counseling application to be accepted, you would first need to be declared as over-indebted. This basically means that you have to be unable to make your monthly payments on time. Whether you are unable to pay the minimum on your monthly installments or not will be determined by an appointed credit counselor.


  • It is not going to be free


It is not going to be free
It is not going to be free

If you are over-indebted, you need to understand that credit advisement is going to cost you. On the brighter side, you should keep in mind that even though credit counseling has its fees, these fees may not by that high because they are regulated by the NCR. That means that based on the specific conditions of their registration, credit advisors agree to charge an amount that does not exceed what has been stipulated in the guidelines. Here are the fees that you should expect:

  • A fee for application

There is an application fee that anyone applying for a credit advisement would have to pay. The fee is for the review of your debt that the credit counselor is going to do.

  • A fee for rejection

If, after reviewing your debt, the credit advisor determines that you are actually not over-indebted, you would probably need to pay a rejection fee.

These two fees are the only fees that you are going to have to pay directly to the credit advisor. All other fees that you are going to have to pay will be included in your new repayment plan.

  • A financial obligation advisor’s fee

That fee is also referred to as a restructuring fee


  • An after-care fee


An after-care fee
An after-care fee

In addition to the previous fees, you will also need to pay an after-care fee each month. That fee goes to your credit advisor.

You may need to take care of some legal fees.

You should know if there are legal fees that you may be liable for, you need to get that information up front by your credit advisor.


  • You may have some bills that could be excluded


In case you were in default, prior to applying for a financial obligation advisement, and some of your creditors have started a legal procedure against you, you may get that amount of money that you owe excluded from the credit advisor’s review. This just goes to show that you should not wait until the last moment before you apply for a debt counseling.You need to do it before it is too late.


  • Even after applying for a credit counseling, you may still not be completely safe from your creditors


Even though one of the main ideas of credit advisement is to give you a protection from your creditors, after 60 days of your credit counseling application, these creditors may withdraw from the credit advisement process. That process is referred as determination, and it goes into action once a creditor issues you with a 86(10) notice. What it means is that the creditor who has withdrawn from the credit counseling would be able to pursue criminal action against you.



  • You will have protection from further indebtedness


If you fall behind on some of your repayments, you automatically become liable for both the collection costs and interest, as well as the principal debt.


  • You will lose access to additional credit


You will lose access to additional credit
You will lose access to additional credit

While in the process of credit counseling, consumers do not have access to any new credit as the loan lending companies are strictly forbidden from issuing any loans to such borrowers, unless it is a consolidation loan that does not lead to further indebtedness.


  • Financial obligation advisors are not all the same


The level of skills and competency of any credit counselor is absolutely personal and can vary from on debt advisor to another. It that sense, it is quite easy to find a debt advisor. However, finding a debt counselor who actually has the much-needed set of skills and level of competency is something much harder. It is important not to pick the first debt counselor who you find, as the chances of that debt advisor to be the best fit for your specific financial situation are not that great. Do the necessary research and find a debt advisor who can actually help you.

  • Cases of reckless lending


Cases of reckless lending
Cases of reckless lending

If, when reviewing your situation, the debt advisor determines that at some point, one or a number of your creditors have extended your credit recklessly, that debt advisor is actually obliged to issue a proposal, recommending reckless lending.


  • Debt advisement does not make your problems disappear into thin air


Even after applying for a debt counseling, your debt is still going to remain your responsibility. You need to stay involved in each step of the debt advisement process.

Author: Peter

I am Peter, I love writing about financial topics in general and how to save money, one could say it is an obsession. If you like what I write here please get back to me with praise, edits or criticism

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