What Are Credit Counseling and Debt Management Classes
Credit Counseling is a new concept in bankruptcy law. Good lawyers have told their clients for years to visit reputable credit counselors when they’re telling potential debtors of their many bankruptcy and non-bankruptcy options. There are credit counselors who’ve been around for years helping people repay or restructure their debts and negotiate with their creditors for them, for a fee. The more reputable ones also analyze people’s financial situation and talk about the causes, effects and solutions of being buried in debt. Going to one usually is a prelude to filing bankruptcy, but often a solution to financial issues allowing people to avoid filing bankruptcy.
However, the new law stated that no one can file a bankruptcy in the U.S without first obtaining a certificate proving that they’ve done credit counseling. Apparently, this is to educate everyone and stem the tide of bankruptcies being filed. That’s great, in theory.
In reality, my guess is that most of the companies started in response to the new law were created for one purpose: to sell certificates needed to be eligible to file bankruptcy. Thankfully, it has made most of them easy to work with.
All though usually I refer people to these credit counselors who are sent right back to me. I don’t know the statistics regarding this, but I suspect that very few people going to a credit counselor to get the certificate don’t file bankruptcy after meeting with their credit counselor. This is especially true when people qualified for filing bankruptcy have run out of options and decided to file for bankruptcy and are then sent to credit counselors by bankruptcy attorneys. Thus, the new bankruptcy law made this requirement to stop bankruptcies and it only makes an obstacle which must be overcome by investing 2 hours and about $50 for a debtor before he may file bankruptcy.
Basically, most companies require in-person 1.5 hour interviews and review of a booklet and budget; or an on-line webcam session that’s interactive for you to input your budget info. When both end, you pay the money, get your certificate and take it to your bankruptcy attorney.
For the in-person sessions, Consumer Credit Counseling is recommended and for the internet session, users registered with Hummingbird Credit Counseling are good.
Have your homework done before picking up a credit counselor because, for you to be able to get the certificate, you need one that’s approved by the US Trustee or Bankruptcy Administrator. Both of the two are recommended. Also, beware of credit counseling in the non-bankruptcy context, as the industry is full of fraud and abuse right now, enough that Congress has investigated it and the IRS revoked the tax-exempt status of about every group it examined in 2006.
Debt Management Class is also required in the new bankruptcy law. It’s more useful. The ones commonly seen are on-line video presentations teaching budgeting skills, how to choose between different debt products and other basic financial information which we all could use a refresher on and things many of us have never heard of. The idea is to help people from going into financial traps again, which is a practical and useful concept.
In SC if you don’t take the class and sign a SC required form that must be filed with the court, or if you don’t take the class in NC, your case’s closed without dismissal.
Online it only takes 3+/- hours and costs about $19 per debtor (using Hummingbird). If the case closes WITHOUT a discharge, the debtor has to pay $260 for another court filing fee to reopen the case, pay his attorney for motioning to reopen, take the class and ask for discharge.
