Credit Counseling Comparisons
Here's how credit counseling stacks up against debt settlement, debt consolidation, and bankruptcy.
Credit Counseling / DMP
- Reduces Principal?
- Generally no
- Process
- Voluntary, non-legal
- Typical Length
- 3-5 years
Debt Settlement
- Reduces Principal?
- Yes, often significantly
- Process
- Voluntary, non-legal
- Typical Length
- 2-4 years
Bankruptcy
- Reduces Principal?
- Yes, via discharge
- Process
- Court process
- Typical Length
- Months to 5 years
Credit Counseling vs. Debt Settlement
Credit counseling generally doesn't reduce your principal balance — it restructures how you repay it, often at a lower rate. Debt settlement can meaningfully reduce what you owe, but at a steeper credit cost.
Credit Counseling vs. Debt Consolidation Loans
A DMP is administered through the counseling agency, using negotiated rates with your existing creditors — it's not a new loan. A debt consolidation loan, by contrast, is new financing you use to pay off existing balances.
Credit Counseling vs. Bankruptcy
Credit counseling is voluntary and non-legal; bankruptcy is a formal federal court process.
Credit Counseling Is a Required Step Before Filing Bankruptcy
Federal law requires most filers to complete a credit counseling course from an approved agency within 180 days before filing for bankruptcy — this makes credit counseling relevant even to people who ultimately pursue a different path entirely. See our Bankruptcy Eligibility page for the full filing requirements.
Results vary based on individual circumstances. This information is educational and not a guarantee of outcome. Consult a certified credit counselor for advice specific to your situation.