Debt counseling has become extremely popular. This is not because people are particularly drawn to the concept of being in a debt program, but because current circumstances have driven there. The current state of the world economy is anything but sound and it is an understatement to say that many families and individuals are hurting. A recent study has shown that the rate of bankruptcy filings has skyrocketed in the last couple of years. All this is due to the downturn in the markets. While there are those that opt to go into bankruptcy, namely Chapter 13, to keep their Creditors at bay, there are those who even though neck-deep in debt, opt to go a different route. That route debt counseling.The term debt counseling refers to the process of negotiating with a consumer’s creditors in order to come up with an amicable plan for the repayment of the said debt. In the United States, this is referred to as credit counseling. This is usually the strategy adapted when someone approaches one of the many debt counseling agencies in existence today for a map to restructure his or her debt.

Debt counseling is definitely a by-product of a credit society. We are living in a time when credit runs practically everything. People buy today and pay tomorrow. Businesses encourage it and the financial sector backs it. In a world where luxuries abound, and personal discipline is lacking, it is not hard to see how individuals can quickly rack up credit and be totally unable to pay it back.

One of the culprits is layoffs. In an effort to cut back and return to profitability, many businesses are laying off workers in what they commonly refer to as “restructuring” Workers then find themselves without work and are still required to pay the loans that they had taken earlier. That has essentially contributed to an endemic rate of loan defaults. Debt counseling agencies usually strategically position themselves to reach these individuals.

The process of debt counseling involves the debtor, the creditor and the debt counseling company. The person who is in debt usually reaches critical mass and realizes that their debt is unmanageable. In many cases, the debt agencies usually maintain contact with the courts and other lenders to determine who needs their services. They then proceed to proactively contact the individual.

Debt counseling elicits mixed feelings. There are those who feel it’s a life saver and they have good reason. The agencies negotiate with the creditors on behalf of the debtor to either eliminate the debt or reduce it drastically. Instead of the debtor paying to several different debtors, the agency re-negotiates with the creditors and has the debtor paying only one low amount. This can be a welcome relief to someone trying to juggle many different aggressive creditors.

While debt counseling has been hailed as an excellent way to manage one’s return to credit worthiness, it is not without critics. Some financial experts feel that debt counseling is frowned upon by many lenders who view it as a way for a debtor to skirt responsibility.