In a Nutshell: Debt Reduction Services is a nonprofit organization dedicated to helping consumers eliminate debt and build healthier financial lives. The company helps consumers pay down debt, build credit, and improve financial literacy through its educational arm, Money Fit. Its programs look forward and encourage consumers not to dwell on past mistakes. Counselors equip participants with the tools and knowledge they need to avoid adverse choices in the future while resolving immediate concerns. That can take several forms, including debt management, debt counseling, and bankruptcy certificate services.
Debt and credit are sensitive topics for many consumers because they can both be stressful — especially for couples. A 2017 survey by Ramsey Solutions showed that the greater a couple’s debt, the more likely they were to experience conflict around it. That is why debt is the second-leading cause of divorce.
As with any debt situation, the only solution is to work hard to pay down debt and stay debt-free. Todd Christensen, Education Manager at Debt Reduction Services, told us how one couple set out to accomplish that, but like many people, they were afraid they couldn’t achieve the goal on their own. So they turned to Debt Reduction Services for resources and guidance on eliminating debt.
He said the couple discovered they had only one issue on their credit report, and although it was a significant one, they could solve it with enough commitment and focus. Within three months, they were closing on a new home — an accomplishment that would have been unthinkable less than a year before.
“It’s just so exciting to see,” said Christensen. “Buying a home is a huge change — to go from the instability of renting and not knowing if the landlord or landlady’s going to raise your rent or if you can afford to stay there unless you’re on fixed payments. I love those moments, and they are the moments that I cherish.”
Debt Reduction Services is the nonprofit behind the debt relief organization Money Fit. Although both help individuals, couples, and families address debt, they approach the problem by emphasizing holistic financial health, not just the debt side, which often has a stigma attached.
“People hear the word ‘debt,’ and they just don’t want to talk to anybody,” Christensen said. “When I would run a booth at a public event, people would see the word ‘debt’ and they would cross to the other side of the aisle. They don’t want to associate with somebody who helps people in debt.”
Destigmatizing debt is an ongoing cultural battle, but dealing with debt is something everyone can do. Debt Reduction Services offers webinars and one-on-one counseling services to help people accomplish that. It teaches consumers how to assess their situations, weigh their options, and decide on the best course of action.
Money Fit Offers Clients More than Debt Management
“Money Fit is a great description of what we do. It’s not just debt,” Christensen said. “We are all about overall financial health by using credit building, getting out of debt, and saving for the future. All of our educational materials reflect that.”
One of Money Fit’s primary services is debt management, a program that works with a client’s creditors — including credit card companies, stores, banks, utilities, and phone providers — to lower interest rates. Debt management isn’t a refinance or a consolidation; it’s a process of negotiating payments that are feasible for the borrower to pay back without undue hardship.
“That’s historically our bread and butter,” Christensen said. “More recently, in 2005, a new bankruptcy law went into effect requiring bankruptcy filers to meet with a nonprofit credit counseling agency. We’ve provided that counseling budget briefing since 2005 along with the education certificate that people need after they file.”
“With the explosion of student loan debt since the Great Recession, a lot of students or graduates find that they are struggling financially and need a more affordable repayment plan,” Christensen said. “They try to work with their service provider and find that they get lost in the system. It’s not the most intuitive. So we offer our expert counselors to hold their hand through the process.”
Debt Counseling Helps Consumers Build Stronger Finances
“When somebody reaches out to us, obviously they’re stressed and worried about their debt situation,” Christensen said. “We’ll ask them what’s going on, what are their main concerns.”
Debt Reduction Services counselors will help clients assemble a household budget — free of charge — so they better understand their financial situation and can pursue the most feasible path to independence and stability. Part of the program includes providing the necessary financial literacy resources that many people lack.
“We’re not taught this in school, and the majority of parents admit they don’t teach their kids or talk to them about money,” Christensen said.
These efforts are all aimed at getting clients into a stronger financial position. Debt Reduction Services counselors understand that dynamic, and they aim to provide the necessary help, not judge prior decisions or dwell on past mistakes.
“A lot of us do feel like we’ve failed if we have debt that we’re struggling with,” Christensen said. “We live in a consumer society, and whether it’s medical debt or we’re in between jobs, we need to use credit cards to survive.”
Debt Reduction Services doesn’t judge people on how they got into debt. The nonprofit’s goal is to get them out of debt and provide the education they need to stay out.
“We try to be very supportive because, again, our goal is not to dwell in the past. It’s very forward looking,” Christensen said.
The Pros and Cons of the Four Routes Out of Debt
Many creditors are amenable to working with consumers, and they often have in-house hardship programs that will work with people to find a solution. If that’s not feasible, they do have other options.
“If you’re in debt, you have four options for getting out,” Christensen said. “One, you can get out of debt on your own, and we teach those classes. Those are all free, whether you’re using that snowball that’s so popular or the avalanche. That’s usually the best way to go because it doesn’t involve fees, and you maintain your control.”
The second possibility is a debt management program through Debt Reduction Services. The program helps mitigate and eliminate debt by rolling multiple debts into a single monthly payment, often at a lower interest rate. One of the significant perks of that approach is that it does not directly affect consumers’ credit scores.
“FICO has made it pretty clear — it’s probably been 20 years or more since they even considered that as a factor because it’s not a reliable predictor of credit score,” Christensen said.
The third option is debt settlement, an attractive one for borrowers who are delinquent on their payments. Under a settlement, consumers pay back a smaller portion of what they owe. Their credit score will take a hit, but they will get out of debt at a lower cost and can then rebuild their credit afterward.
The fourth option is bankruptcy, which more or less wipes the slate clean, but at the cost of a severe hit to creditworthiness. Without a doubt, that is a last-resort recourse, and all other options should be explored before going down that path. Consumers can’t even begin the bankruptcy process without first seeking outside consultation.
“They require you to see a nonprofit credit counselor anyway,” Christensen said. “So, you can’t even get to that fourth step without seeing a credit counselor.”
Illuminating the Benefits of Debt and Credit
It’s not always easy to keep a positive attitude toward credit. Sometimes people find a way out of debt quickly and easily. Although that couple Debt Reduction Services helped had credit problems, they assumed those problems were much larger than they were — and they are not alone.
“I think we fixate a little too much on credit in this country,” Christensen said. “People try to get perfect credit. The whole point of credit is to minimize the amount of interest you pay in the future — especially on that home loan.”
Loans and debt are useful tools that consumers can leverage to their advantage. They can meet their needs by taking on debt, whether that’s buying a new car or emergency medical care. And by paying that debt off responsibly, their credit rating will improve. The more diligent they are, the lower their interest rates will be in the future, and the less they’ll pay over time.
“The whole point is making future finances more affordable so you can use your money for your top priorities and not to pay interest,” Christensen said.
In a perfect world, there would be no need for debt settlement or management, and especially not bankruptcy. In that ideal world, Debt Reduction Services and Money Fit would be obsolete. And that’s something Christensen said we should all strive for.
“If that service became irrelevant, we’d be fine,” Christensen said. “We’d be happy for all the people who got a better situation, financially.”