Credit counseling and choosing your help carefully

In April 2005, The Federal government passed legislation composing the most sweeping changes in United States bankruptcy law in more than a quarter of a century. Under previous bankruptcy legislation, individuals with too much debt could file using Chapter 7 of the Federal Bankruptcy code; new debtors will likely have to file under the more strenuous Chapter 13, which requires a debt repayment plan. Newly drafted bankruptcy law, known as the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005, was designed to prevent consumers with debt problems from being able to easily have their debts wiped out in court. An additional provision of the recently passed legislation requires people thinking about filing for bankruptcy to first submit to credit counseling prior to filing for bankruptcy.

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The purpose of credit counseling is to help those who have trouble managing cash find out how to do so wisely. By definition, anyone who is filing for bankruptcy has a money management quandary, so credit counseling is probably a smart idea. An effective credit counseling agency or financial advisor will aid their client with establishing a debt repayment schedule, learning to manage their debts, and finding out how to to shun debt problems in the coming years. On the surface, government-madated credit counseling isn't at all a terrible concept.

The quandary with mandatory credit guidance may be with the counselors themselves. Increased demand will probably motivate a lot of people to become credit professionals who may not have their clients' best interests in mind. A large number of lawsuits have been filed in many states recently that accuse some credit assistance firms that are supposedly not for profit institutions of acting as a front for for for-profit debt consolidation organizations. These "friendly" nonprofit counselors will powerfully urge their clientele to engage in business with their profit-seeking partners. The net result is frequently a costly debt consolidation loan for the customer that might or might not be helping them eliminate their debts. With passage of the new legislation, the credit counseling industry is expected to be burdened with an additional 1,500,000 consumers per year.
 

How might anyone who is legitmately interested in credit counseling seek a professional counseling agency?

Be suspicious of firms that request a substantial payment to obtain a copy of your credit report. Any legitimate agency ought to be able to obtain your financial records for nothing.

Ask the neighborhood Better Business Bureau if they have had any complaints about a particular counselor.

Be wary of firms that ask for a large amount of money right away, particularly nonprofit organizations that tell you that they cannot help you unless you pay ahead of time.

Bankruptcy court is occasionally inevitable. Watch out for agencies that inform you that bankruptcy is never necessary. Counselors that will not discuss bankruptcy filing probably would like to steer you towards a hugely profitable consolidation loan that might not help.

Beware of offers of a quick answer. You didn't obtain such problems overnight, and you will not get out of trouble overnight. Real problems take a while to clear up.

A reputable counselor should pay attention to your concerns. A smart counselor needs a lot of data about a client in order to help them, and that takes some time. If the credit counselor or financial advisor starts claiming to offer "solutions" to your predicament within a few minutes of your arrival, you should be skeptical.

Be patient and talk to a number of agencies prior to making a decision. Making an informed choice about a financial agency could save you a good amount of of money.