Last week, someone I knew from college messaged me in a full-on financial panic. Credit cards maxed out, collectors calling at dinner, and she’d just spoken with one of those debt credit counselors online who promised to “get things under control.” Her gut told her to pause—but she was also this close to signing up. And honestly? Her hesitation probably saved her $50,000 and 5+ years of unnecessary financial pain.
Wait—Aren’t Debt Credit Counselors Supposed To Help?
That’s the magic marketing trick, right? You hear “credit counselor” and suddenly it feels like sitting across from a wise, neutral professional in a cozy plaid vest who’s totally not hired by your creditors. Surprise! Many of these agencies are funded (at least in part) by the credit card companies themselves.
This isn’t always a scam. But it’s definitely not neutral. Credit counseling agencies push something called a Debt Management Plan (DMP). Sounds nice. Like a friendly little spreadsheet with optional hugs.
In reality? A DMP is a structured repayment plan that assumes:
- You can repay 100% of your debt (plus a small monthly fee)
- You’ll stick with the plan religiously for 3 to 5 years
- Your life won’t throw a curveball (lol)
But here’s the kicker: only about 1 in 4 people actually finish these programs. The rest? They get dropped, give up, or fall behind—and end up worse off than when they started.
The $400,000 Mistake Most People Don’t See Coming
Let’s do some rough math. Say you try credit counseling instead of wiping your debt through bankruptcy. You spend five years grinding through minimum payments—never saving, never investing, just treading water. Then you finally get free. Yay?
Except meanwhile, someone else with the same debt filed for bankruptcy, reset their finances, started saving $250/month, and let it grow in a simple app like Betterment. Fast forward 30 years? That early savings head start could be worth well over $400,000.
Not convinced? Here’s the math. If anyone owes you 400 grand, wouldn’t you want to know?
So Who Should Use Debt Credit Counselors?
Glad you asked. Because it’s not “no one.” But it’s definitely not everyone drowning in debt. Here’s when a DMP might make sense:
- You can afford the full monthly payment (with no interest breaks after promo periods)
- You aren’t behind on payments yet—just close
- Your credit is decent, and you’re trying to avoid the hit of bankruptcy
- You’ve reviewed all the other options and this really is the most strategic
Even then, go in with your eyes wide open. Ask these questions before committing:
- What are all fees, monthly and upfront?
- What if I lose my job or miss a payment?
- Will this affect my credit score in the short term?
- What happens if I want to cancel?
If they dodge your questions—or try to push you into signing that day? Nope. Back away like you just saw someone lick the lid at a gas station sushi counter.
Here’s What People Really Need Instead
Most people don’t need discipline drills or a 5-year loyalty contract to Discover Bank. They need space to breathe, emotional clarity, and a plan that fits their actual life—not the ideal future self they haven’t met yet.
That’s why we start with tracking—not budgeting. Don’t build a budget until you’ve tracked your spending for 30 days. Use PayPal, Mint, a notebook, or duct tape and receipts if you must. Just watch what you actually do.
After a month, patterns emerge—and now you can create a plan around your reality. If you’re overspending on streaming platforms or takeout (spoiler: most people are), cool. Now we can adjust. No lectures. No shame.
Real Stories, Real Options
Debt Settlement Can Work—If Done Right
Tasha racked up $38,000 in debt after a divorce and a job layoff combo. She tried a DMP. Didn’t even last four months. Once she stopped bleeding cash trying to repay every cent, she explored debt settlement instead. With the right help, she settled everything for under $16,000, saved herself two decades of headaches, and rebuilt her credit in under three years.
You might owe taxes on forgiven debt (yep, it’s considered “income”), but if you’re insolvent at the time, you might be off the hook. Just talk to a tax pro, okay? Don’t guess.
And Don’t Be Afraid Of The B-Word
You’ve heard the myths: Bankruptcy ruins your life, employers will find out, you’ll never borrow again. Meanwhile, reality is over here waving receipts.
Studies show that bankruptcy filers recover faster, build stronger savings, and are more financially stable long-term than those who try to muscle through. So stop treating bankruptcy like an amputation. Sometimes it’s the surgery that saves the patient.
Quick FAQ About Credit Counselors and Debt Help
Is Credit Counseling Bad For My Credit Score?
Signing up for a DMP won’t directly tank your score—but closed accounts, lower available credit, and delayed payments might. Plus, mortgage lenders and others sometimes view credit counseling as a red flag, even if it’s not technically reported the same way as bankruptcy.
Are Debt Consolidation Loans Better Than Credit Counseling?
Depends. If you have excellent credit and can lock in a low-fixed-interest rate, consolidation can simplify things. But many people get approved with bad rates—or rack new debt on top—which defeats the whole purpose. Also, consolidation doesn’t eliminate debt. It just shuffles it around.
How Do I Find A Legit Counselor If I Want To Try?
Start with the Justice Department list of approved agencies. Then vet them online. No upfront fees, clear pricing, and someone willing to explain pros AND cons? That’s what you want.
Do You Have a Question You'd Like Help With? Contact Debt Coach Damon Day. Click here to reach Damon.
The Truth Bomb Most People Miss
Here’s your pull-quote, your must-share moment, your fridge magnet:
“You don’t have to keep paying the price for trying to do the right thing with the wrong plan.”
That’s what too many people in debt get trapped into. DMPs, minimum payments, robo-advice—they all feed that guilt that says, “I made this mess, I should suffer to fix it.”
Nope. You’re allowed to stop digging, even if you haven’t filled in the hole yet.
So What’s Next?
If you’re confused, cornered, or just want to run a plan by someone who won’t BS you—talk to Damon Day. He’s been helping people through this maze for over a decade and doesn’t push cookie-cutter “solutions.”
Also, check out the Get Out of Debt Guy podcast. It’s like financial therapy with swearing. Get on the newsletter too. We won’t spam you. Just hard truth, real options, and maybe a sarcastic meme or two for relief.
Lastly, grab one of my books like Eliminate Your Debt Like a Pro or How to Get Out of Debt Without Getting Scammed.
