Debt counseling is simply an educational option you have to learn how to avoid incurring any debt. Counseling usually targets the type of money issues where you cannot use management plans and budgets to end your situation. It can involve negotiating to lower your current debts, but in general it is meant as an educational track for you to be on. Everyone should undergo this process at least once in their life, whether they have money problems at the time or not. It is because the right education can keep you from ever having an issue.
It would be best if high schools or colleges made a financial course mandatory, with real life examples and situations. Parents have a duty to teach their children how to handle money too, but an extra course in school can certainly be an awakening if it is taught correctly and not as an elective. Debt relief counseling not only teaches you how to have a sound financial mind, but looks at factors which could make it harder for you to stay out of debt.
Typically, when you meet with a counselor they are going to ask you to fill out some paperwork and then set up an appointment. If time allows they may allow you to fill out the paperwork while you are still there. The debt counseling paperwork asks you to list everything you make, spend, and have in savings. The money you have is not hard to list, but sometimes it can be better to be at home when looking at what you spend during a month. They also ask for you to put in how much you owe on credit cards, mortgages, and any other loans. You have to know the total, as well as the monthly payment.
All of the debt and expenditures are added up and compared to how much you make. In debt counseling the counselor is looking to see where you might overspend. There are national averages in how much a single person up to a larger family typically spends on food at the grocery store and eating out. Miscellaneous expenditures such as entertainment, auto repairs and others are also examined. The counselor is going to look for a way to eliminate the expenses you do not need. They also look for a way to reduce certain expenses. It provides a pathway to saving more money in a month, which can be used to pay off a credit card quicker or stop defaulting on expenses.
Most everyone has a way to reduce what they spend, but there is also a psychological barrier that has to be addressed. Debt counseling will also look at psychological issues that might affect how a person spends. For instance, do you panic when you are limited on funds and just spend more? Do you spend more when you are depressed? Do you have a compulsive spending habit? All of these things are examined to determine if there is an issue and how to address it. If you do not address the cause, the effect cannot be reduced.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.