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Credit Counseling – Get In Line Now To Avoid The Upcoming Rush
By: Charles Essmeier
Credit counseling is a valuable service for consumers who have trouble managing
their finances. A distinctly different service from debt consolidation, credit
counseling assists consumers with problem debt by educating them about the
basics of money management. Americans really don’t get the education they need
about how to manage bank accounts, balance checkbooks, or pay bills on time, and
credit counseling can provide these services as well as others. By educating
consumers, counselors hope to reduce the number of debtors who are forced to
file for bankruptcy. Anyone whose financial situation is such that they would
benefit from credit counseling may wish to seek it out in a hurry, however. A
number of different factors are coming together in such a way that the
counseling industry may soon be completely swamped with more clients than it can
handle.
Recently passed bankruptcy legislation, designed to reduce the number of
consumer bankruptcy filings, will now make credit counseling mandatory as a
prerequisite for a bankruptcy petition. Anyone who wishes to file for bankruptcy
relief must first demonstrate that he or she has undergone credit counseling
during the past six months. By requiring counseling as a condition of debt
relief, Congress hopes to reduce or eliminate repeat filers. The counseling
industry is preparing for the additional customers now, as the new law is set to
take effect in October 2005.
Other factors will weigh heavily on the counseling industry, however. A 2003 law
passed by Congress requires credit card companies to raise their minimum
payments so that their customers can repay their balances more quickly. This has
resulted in the near-doubling of minimum payments, and the average American
household, which has a credit card balance of $10,000, will see their minimum
monthly payment rise from $200 to $400. Since many households can only afford
the minimum payment now, the hike in the minimum due may drive more Americans
into counseling and bankruptcy.
The increased reliance upon interest-only mortgages and low-interest adjustable
rate mortgages could be a factor, too, if home prices either fall or fail to
increase as they have. The sky-high prices in many markets have led homebuyers
to purchase more homes than they can really afford, often using mortgages that
are themselves riskier than the traditional 30-year loan. Should interest rates
rise or housing prices fall, tens of thousands of homeowners will find
themselves with loans that either exceed the value of the home or are
unaffordable.
Those in the credit counseling industry say that this is a critical time, and
the combination of new laws, fragile markets, and credit card industry overhaul
could push a number of consumers towards bankruptcy and mandatory counseling.
Anyone with problem debt who might benefit from counseling should consider doing
so sooner, rather than later, as qualified credit counselors may be quite busy
this fall.
About the Author:
©Copyright 2005 by Retro Marketing. Charles Essmeier is the owner of Retro
Marketing, a firm devoted to informational Websites, including http://www.End-Your-Debt.com,
a site devoted to debt consolidation and credit counseling, and http://www.homeequityhelp.net,
a site devoted to information regarding home equity lending.
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