Counselors typically contact your creditors and attempt to have the interest rateson your loans or credit cards reduced, making repayment easier. (Some lenders are more willing than others.) The counselor also negotiates with your creditor to stop late fees.

Credit counselors also offer services beyond debt management plans. “Credit counselors are a fountain of knowledge and can help with budgeting tips, advice on student loans, and how to deal with debt collectors,” says Howard Dvorkin, founder of Consolidated Credit Counseling Services.

Debt management plans come with a price. Your credit card will be closed to prevent you from racking up anymore debt. There is no point in paying off debt only to build it up all over again.

Fees for the debt-management plan, if any, vary based on each agency and state laws.

You may, however, decide a debt-management plan is not for you. If your unsecured debt is equal to or exceeds your annual income, then bankruptcy may be a more realistic option.

Meeting with a bankruptcy attorney is essential.

“Bankruptcy attorneys will want to figure out whether you qualify for Chapter 7 bankruptcy , which allows you to wipe out most or all of your unsecured debt,” says Gerri Detweiler, director of Consumer Education for Credit.com .

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