Connecticut Credit Counseling

Connecticut consumers, much like the rest of the country, are being inundated with advertising messages from debt consolidation and consumer credit counseling agencies. Unfortunately, far too few completely understand the nuances of debt management and either end up enrolling programs unfit for their situation or with companies who do not have their best interests in mind. The purpose of this article is to distinguish between the types of debt consolidation programs available for individuals, as well as to help inform clients about the laws regulating credit counseling in Connecticut.

(Note: the following is for education purposes only and PayingPaul.Com makes no guarantees about the accuracy of anything contained herein. It is not complete and may not be up to date. For legal advice please consult with a lawyer licensed in Connecticut.)

The two most common types of debt consolidation are debt counseling and debt settlement, also known as debt negotiation. Although both are considered forms of debt management, they are in fact very different in their approaches.

The first and oldest type is debt counseling. With the help of a credit counselor, you can analyze your budget, get tips on how to better manage your debt, and other assistance. If your situation permits, the credit counseling organization may suggest you enroll in a debt management plan. These programs are typically offered by non-profit debt organizations, who work on your behalf with your creditors to reorganize your debts into more favorable payment terms. This usually involves an interest rate reduction on your credit cards and the convenience of one low monthly payment. It should be noted that debt management programs are not for everyone and much of the services they offer can be done on one’s own. Even though they are normally offered by non-profits, they do charge a fee for these services.

Debt settlement services aim at getting creditors to agree to accept a lump sum equal to 40 to 60 percent of the outstanding balance in full satisfaction of a debt. The savings from negotiating your credit card debt can be quite dramatic, and it’s the fastest way to get rid of your debt without bankruptcy. Although you tend to save a lot more money in debt settlement, there are some disadvantages to using this type of service. Much of the downsides stems from the fact that you have to fall behind on your payments while in you are enrolled in the program in order to make your creditors willing to lower balance. Due to this fact, your credit will most likely be impaired, and it may result in escalated collections, such as creditor calls and even lawsuits.

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Connecticut Debt Management Regulations
Like most states, Connecticut has some regulation of the debt management industry. Under the law, only non-profits can act as “debt adjusters”, which is the legal term for debt consolidators in Connecticut, and even these companies must be licensed with the state.


A “debt adjuster” is defined as anyone who acts “as agent of a debtor, money or evidences thereof for the purpose of distributing such money or evidences thereof among creditors in full or partial payment of obligations of the debtor; and “debtor” means any individual who has incurred indebtedness or owes a debt for personal, family or household purposes.”

According to Connecticut Attorney General Richard Blumenthal, “Our law requires debt adjusters to be licensed, to safeguard clients’ funds in a separate account, keep proper records, and make payments to creditors promptly.”

To learn more about the laws regulating this industry, please follow this link: Debt Statutes in Connecticut

Other Resources

Filing Bankruptcy in Connecticut

Bankruptcy Laws in Connecticut

Debt Collection in Connecticut