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Credit Counseling Is No Good If You Don’t Know What You’re Getting
By: Talbert Williams
The recently passed bankruptcy law known as the.Bankruptcy Abuse and Consumer
Protection Act was intended to make it harder for consumers with debt problems
to file for bankruptcy protection. It was also intended to keep the credit card
companies profits as high as possible, as that industry suffers the most from
bankruptcy filings. An additional “benefit” to this legislation is to provide
financial counseling to those who need it.
“Those who need it” is defined in the new law as everyone. Counseling will now
be a mandatory prerequisite for anyone considering a bankruptcy filing. The
theory is that by offering financial advice to those who have problem debt,
repeat filings can be avoided. That’s helpful, as many Americans don’t get
sufficient financial education in our schools. There is just one problem with
this requirement - it’s largely undefined.
The credit counseling industry has been suffering some recent hardships as the
Internal Revenue Service and the Federal
Trade Commission investigate fraud that seems to run throughout the industry.
The most frequent complaint is that many agencies which claim to be nonprofit
are actually subsidiaries of for-profit companies. Some of these “nonprofit”
groups have been encouraging their clients to consolidate their debts using
repayment plans that involved the for-profit companies, which leave the motives
of the nonprofit agencies in question. As these matters are being investigated,
this new legislation requires consumers to seek help with their debt problems,
adding to the general unease associated with seeking help. Unfortunately,
Congress left this portion of the legislation rather vague. Yes, counseling is
required, but with whom? Can anyone who calls themselves a counselor qualify?
The bill doesn’t say, although the US Trustees office is accepting applications
from companies that wish to be approved. May fees be charged? Yes, the bill says
that such fees may be “reasonable” but doesn’t say what that means and adds that
counseling must be provided even if the debtor cannot pay.
Who must pay for the counseling? Will the debtors pay themselves, or will
taxpayers foot the bill? Or the creditors? While it is generally assumed that
these matters will be worked out by October 2005, when the law takes effect,
some in the industry are concerned that some debtors simply won’t bother.
Instead of seeking counseling, they may just let their creditors chase them in
hopes of collecting payment.
That’s the last thing anyone wants, so it would be in the best interests of all
Americans for the Government to define as many aspects of this legislation as
possible before the deadline. It would also help if these issues, once resolved,
were advertised sufficiently that anyone who was considering a bankruptcy filing
would know what to do. Given the way Congress works these days, that may be
asking a lot.
About the Author:
Talbert Williams offers debt consolidation referrals and advice. For more
information, articles, news, tools and valuable resources on debt solutions,
visit this site: http://www.1debtfreedom.com
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