Credit counseling - Are customers seeing results?

Recent changes in Federal bankruptcy law require that debtors enroll in a credit credit guidance program prior to filing for debt relief in court. So far, government-madated counseling doesn't seem to be helping anyone.

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Sweeping bankruptcy reform laws was intended to make it tougher for people who wish to avoid paying their bills to have their debts forgiven by the courts. The credit advice industry has benefited tremendously from the restructuring of the U.S. bankruptcy code ratified in 2005. In order to stop those debtors who don't care to repay, which proponents of the bill say is the leading cause of most bankruptcies, Congress put a few obstacles in the path of would-be applicants, like the requirement that anyone thinking about filing for debt relief must first undergo credit counseling.

As a result of the influx of new business generated by the bankruptcy law, a lot of agencies have had to start meeting with people in groups and counseling people over the World Wide Web. Government-madated credit guidance has been good for the credit counseling industry, as they are suddenly buried in customers. Group counseling is a lot less personal and not as thorough as it should be, but the Government-mandated fifty dollar maximum fee that counseling agencies are able to charge has limited the opportunities of the companies. The industry appreciates the commerce that the new debt relief legislation has thrown their way, even if they are having trouble keeping up with every one of their new customers. Burdened with new debtors as a result of the revision in law, counseling agencies simply cannot provide enough help for the money paid them.
 

The main motive for demanding credit counseling is that it was assumed that assistance might be able to steer a number of people in the direction of a debt management plan rather than having them apply for bankruptcy. There were a number of reasons for including credit assistance in the debt relief law, one of which was to provide clients with some money handling education that they otherwise might not get. Since the legislation was approved at the behest of the credit card industry, the provision of the law requiring credit counseling was added in order to persuade more debtors to pay their debt. Not too many consumers ever have any sort of formal education when it comes to how to manage their finances, so a bit of credit assistance could help them in the future.

No one wants to apply for bankruptcy; it harms your credit score and makes it very hard to borrow money, find a house, or even find a job. More often than not, a consumer's financial burden is caused by either an unforeseen loss of job or a medical crisis, such as an accident or illness. That most debtors end up filing for bankruptcy should not come as a surprise to anyone; most people who file for bankruptcy do so as they simply cannot pay their financial obligations. It is clear that government-madated counseling hasn't worked in the intended manner. A recent survey shows that a whopping ninety seven percent of all people who have submitted to credit guidance as required by the new debt relief law have ended up filing for bankruptcy. The notion that debtors file for debt relief because they simply don't want to pay is a myth. Most people apply for bankruptcy because they have become victims of circumstances beyond their control.

Until Congress decides that the law is flawed, those seeking debt relief will continue to undergo financial assistance, whether it aids them or not.