Credit counseling is guidance provided by a certified credit counselor as a pre-emptory step to filing for bankruptcy. These services can also be sought out by anyone with financial difficulties. In credit counseling, a counselor sorts through a person's finances, designs a budget, and provides guidance on how to manage debt and organize finances.
Credit counselors help people develop a plan to fit their personal financial needs. Many credit counseling programs offer workshops and educational materials to assist people with debt management and financial planning. Often credit counseling and pre-bankruptcy counseling are the first steps people take to get their debt under control before filing for bankruptcy. That's because although bankruptcy can erase some debts, it also has a negative impact on the filer's credit score and ability to make large purchases and request loans for a number of years. Credit counseling provides an opportunity to address severe financial difficulty and avoid the long-term negative impact of filing for bankruptcy.