A credit-counseling agency serves as an objective party to help you sort through your credit problems, see your credit situation through the eyes of professional, give you some credit education, offer personalized budgeting advice, and design a customized plan to get you out of debt — all for nothing or next to nothing.
A credit counselor asks you about your income sources and tax deductions, as well as your monthly expenses. A quick subtraction of expenses from income tells you how much you have available for monthly debt service, if any. The counselor will suggest ways to adjust your expenses or income, to get you to a positive cash-flow position (in which more money is coming into your household than is going out).
Next, you and the counselor go over all the debts you have to pay. The positive cash flow from the earlier calculation is applied to the amount you have to pay. If anything is left over, you’re basically done — you leave with an action plan and a budget you can follow to keep your expenses in line with your income.
If the result is negative (you have more expenses than you have income), you and your counselor rework the expenses to free up cash flow, and he or she tells you what your debt service would be under a debt-management plan.
Alas, there is no magic wand to make all your financial problems disappear, but a good certified credit counselor always offers solutions. Expect more than one solution, and expect some solutions you don’t like. Your counselor will give you a balanced perspective of what you need to do, how long it will take, and what resources are available to help you along the way.