A new wrinkle with the federal bankruptcy law

A less emphasized element of the new Federal bankruptcy law requires all people filing for bankruptcy to enroll in credit counseling programs at their own expense. This could be seen as adding insult to injury for those median and above income earners who have already lost access to Chapter 7 bankruptcy under the new law. Not only will they have to repay a good portion of their debt after bankruptcy, but they will also have to pay for pre-bankruptcy credit counseling.

Many have criticized this counseling requirement, pointing out that it such counseling comes too late to do any good. People who are ready to file bankruptcy are too far along in the process to benefit from advice and assistance from credit counselors.

Now a new problem has arisen - the credit counseling agencies themselves are unable to keep with the sheer volume of new clients forced to seek their services. Furthermore, most of these agencies are non-profit and have been forced to reduce their fees for these customers. After all, anyone ready to file for bankruptcy tends to have little spare cash hanging around.

So this has lead to a budget crisis at some agencies, which have already been suffering from cutbacks in support from credit card companies. Not a pretty picture. Here is a link to an article on this subject in the Columbus dispatch. An interesting read.

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