Credit counseling could help, but only if the Government actually approves counselors

One of the few things about the Bankruptcy Abuse and Consumer Protection Act, which took effect this week, that actually seemed like a good idea was the notion of mandatory counseling for bankruptcy filers. While that idea has its problems, such as the fact that many filers are people who lost jobs, and not reckless gamblers who can’t manage money, there are some good points. It’s a fact that most Americans never receive any type of formal financial training, and sitting people with problem debt down with a trained professional to discuss his or her financial troubles makes a lot of sense. If more people were trained a bit better in how to manage their money, we’d have fewer people filing for bankruptcy.

Like it or not, the bill is now law and the counseling is required for anyone who wishes to file. Now there’s a new problem - the Government requires that any counselors first be approved by the US Trustees before they can counsel pre-bankruptcy filers. The law is already in place, but for the most part, the counselors are not. And that could be a huge problem for anyone who wishes to file soon.

As of a week ago, only about 40 counseling agencies had been approved, and that’s a nationwide figure. That’s forty companies to handle the estimated one and a half million bankruptcies that take place in this country every year. Obviously, forty companies cannot handle that many people for one on one consultation, so what happens now?

The law does provide for some solutions. Counseling can take place via phone or over the Internet, and it is expected that many consultations will not only be conducted that way, but will be done in groups. Not very effective, but it does count for something, we suppose. In areas where counseling isn’t available at all, the law will waive the counseling requirement, so prospective filers may have an out in that regard.

On the other hand, talking to people in groups, over the phone or over the Internet doesn’t really offer the kind of hand-on attention that a problem as serious as bankruptcy requires. Worse, the debt consultation industry doesn’t exactly have the best reputation these days, with the Justice Department investigating a number of agencies for rather questionable activities. Now we’ve added the requirement that people seek help and pay for it, while not guaranteeing that they actually receive something of value. Perhaps this problem will resolve itself in time, but for now, anyone who needs a professional consultation for their problem debt will have a lot of trouble finding someone to help them.

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