If you’re struggling with debt, you have several options, aside from bankruptcy. Two options to consider include debt negotiation and credit counseling. Let’s begin by looking at debt negotiation. Your goal in debt negotiation is to work with your creditors to develop a repayment plan that works for both of you. Items under negotiation include the total amount due, the amount of repayment, the repayment period, the interest rate, and any penalties that have been added. Debt negotiation is focused only on developing a repayment plan for your debt. With debt negotiation, you will be doing all the negotiating yourself.

With credit counseling, you will be working an agency that will assist you with a wide variety of tasks, including debt negotiation, developing & maintaining a budget, developing financial management skills, and credit score improvement. Both credit counseling agencies and debt negotiation companies can help you avoid bankruptcy and manage your debt effectively.

Credit counseling agencies partner with major creditors to help you reduce interest, stop late payment fees, negotiation debt repayment, reduce monthly payments, and educate you on financial management. Your creditors work with consumer credit counselors because it is to their benefit to help you get out of debt. After making regular payments for a few months, your credit counseling agency can have your accounts re-aged and your credit file will show the new updates. This can help improve your credit history, and build decent credit ratings.

Credit counseling is probably a better choice for people who need help with financial management, budgeting, and assistance in eliminating their debt. Debt negotiation is probably a better choice for people who have good negotiation and communication skills. If you already know about budgeting and managing personal finances, then you may be better off working with your creditors directly (on your own) to reduce your debt. One of the benefits of credit counseling is that companies are often more inclined to work with another company, than to deal with an individual debtor. Both solutions have pros and cons, so you will need to consider your skills, time commitment, and needs before deciding between the two.