With the Bankruptcy Abuse and Consumer Protection Act taking
effect this month, consumers are hurrying to file for personal
bankruptcy as soon as possible. The new law makes it harder,
more expensive and more time consuming to file for bankruptcy,
and increases the likelihood that debts will have to be repaid,
rather than forgiven.
The new law requires lawyers, higher fees and strict proof of
debts and income, as well as a "means test" to determine if a
debtor may file under the more forgiving Chapter 7 or the
tougher Chapter 13. Adding to the burden for filers is a new
requirement that mandates all bankruptcy filers undergo credit
counseling prior to filing.
The purpose of credit counseling is to help the debtor assess
his or her financial situation and to present various options
for paying down existing debt and for avoiding similar debt in
the future. This is generally a good idea, as most Americans do
not receive any sort of formal financial training in school,
even for something as simple as learning how to balance a
checkbook.
The problem is that the Federal government, aware that thousands
of people will be crowding into credit counseling offices, has
made the requirements for this counseling rather skimpy.
The counseling must be provided by approved organizations, and
the government has begun, admittedly late, to approve counseling
agencies throughout the country. A debtor must contact an
approved agency, which may elect to charge a fee not to exceed
$50 for the initial visit.
Those agencies must agree to waive the fee for anyone who cannot
afford to pay. So far, that seems reasonable. The part that
begins to make little sense is this one: the counseling session
must be 90 minutes in length, and may be conducted in person,
over the telephone, or over the Internet.
Consulting with someone who has run up tens of thousands of
dollars in debt, identifying their problems and helping them
either organize their finances or create a repayment plan is not
a simple task, and it is certainly not something that can be
undertaken in a single visit. More importantly, it is something
that works best on a face to face basis, where the debtor can
present any necessary documentation in person.
Doing it over the phone, or semi-anonymously over the Internet
will probably be so ineffective as to be useless. Granted, it
will meet the government's requirement, and if that is all the
concerned parties care about, then that will be fine. But if
anyone is truly interested in having the debtor benefit from
this consultation, then a brief online conference is hardly
satisfactory.
Many of these Internet consultations will probably be "group"
activities, in order to make up for the relatively low monetary
compensation for the agencies. For all parties concerned, this
mandatory consulting will probably be a colossal waste of time.
About the author:
Talbert Williams offers debt consolidation, debt reduction,
credit card debt referrals and advice. For more information,
articles, news, tools and valuable resources on debt solutions,
visit this site:
http://www.1debtfreedom.com
