The Bankruptcy Abuse and Consumer Protection Act was passed in early 2005 with the overwhelming support of the President, both houses of Congress and the major credit card companies. The law, which created sweeping changes in American bankruptcy law, was passed in order to reduce the likelihood that consumers with heavy debts might avoid pick to keep away from paying them by seeking debt relief through the courts. The Act has plenty of provisions, but the one that may hurt consumers the most was the one provision that was supposed to help - the requirement that debtors undergo mandatory credit counselling before filing for bankruptcy.
On the surface, the requirement appears to be laudable. Few people ever receive any kind of formal money management training, so a small bit of counselling, even as bankruptcy approaches, might help debtors avoid further financial trouble in the future. The law was passed with the purpose that, one time educated, consumers would stay out of bankruptcy court in the years to come.
It has not worked out that way, and the bankruptcy law is largely to blame. The law did not set a fee for this necessary credit counselling, but a fee of $50 was suggested and consumers who cannot afford to pay the fee may ask to have it waived. Only sure nonprofit counselling agencies would be approved for pre-bankruptcy counselling. These requirements have resulted in a mess in the counselling industry that benefits virtually no one. Comparatively few agencies have been approved; the ones that have are very busy. The suggested fee of $50, when paid at all, is not to cover the costs of keeping the agencies' offices open. Consumers are ending up getting their "counseling" by the Web, or a conference call, or in a large group meeting. This sort of thing may satisfy the requirements of the law, but it is not helping the people it was supposed to help.
Credit counselling is definitely a worthwhile endeavor, but only if completed properly. The counselor and the client ought to have sufficient time to become acquainted, discuss an overview of the counselling method and to have an in-depth discussion of the client's specific financial situation. After all, if the client cannot receive information that they or he can apply directly to his or her own finances, the whole point of providing the service becomes moot.
In lieu, they have a situation where the clients are being poorly served and the counselling agencies are barely scraping by financially. It seems unlikely that this is what Congress had in mind when they passed the bill. Somebody who has a controversy with debt would definitely benefit from counselling and is encouraged to seek it out. Those who do would be advised to pick a counselling agency that has the time and resources to provide the in-depth kind of help from which a client can actually benefit. Otherwise, the result is a waste of time for all involved.
On the surface, the requirement appears to be laudable. Few people ever receive any kind of formal money management training, so a small bit of counselling, even as bankruptcy approaches, might help debtors avoid further financial trouble in the future. The law was passed with the purpose that, one time educated, consumers would stay out of bankruptcy court in the years to come.
It has not worked out that way, and the bankruptcy law is largely to blame. The law did not set a fee for this necessary credit counselling, but a fee of $50 was suggested and consumers who cannot afford to pay the fee may ask to have it waived. Only sure nonprofit counselling agencies would be approved for pre-bankruptcy counselling. These requirements have resulted in a mess in the counselling industry that benefits virtually no one. Comparatively few agencies have been approved; the ones that have are very busy. The suggested fee of $50, when paid at all, is not to cover the costs of keeping the agencies' offices open. Consumers are ending up getting their "counseling" by the Web, or a conference call, or in a large group meeting. This sort of thing may satisfy the requirements of the law, but it is not helping the people it was supposed to help.
Credit counselling is definitely a worthwhile endeavor, but only if completed properly. The counselor and the client ought to have sufficient time to become acquainted, discuss an overview of the counselling method and to have an in-depth discussion of the client's specific financial situation. After all, if the client cannot receive information that they or he can apply directly to his or her own finances, the whole point of providing the service becomes moot.
In lieu, they have a situation where the clients are being poorly served and the counselling agencies are barely scraping by financially. It seems unlikely that this is what Congress had in mind when they passed the bill. Somebody who has a controversy with debt would definitely benefit from counselling and is encouraged to seek it out. Those who do would be advised to pick a counselling agency that has the time and resources to provide the in-depth kind of help from which a client can actually benefit. Otherwise, the result is a waste of time for all involved.
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