Credit counseling benefits the counselors
By Cathy Moran, California bankruptcy lawyer on May 21, 2008 in General Bankruptcy Information
The efficacy of pre bankruptcy credit counseling has been often questioned. The articulated reason for requiring counseling before filing bankruptcy was the claim that people were filing bankruptcy when there were other realistic options available that counseling could reveal, and bankruptcy avoided. The other, more cynical, explanation was that it was a sop to the credit counseling industry.
My experience is that anyone who considers bankruptcy is already long past the point where it is the only meaningful option. People resist the thought of bankruptcy until something in their financial life becomes intolerable and there is nothing that credit counseling can do but confirm the seriousness of the problem.
The reality of the second explanation for the requirement was brought home to me at the recent NACBA convention where the exhibitor hall was jammed with credit counseling providers, all jostling for a piece of the credit counseling pie: the required credit counseling costs about $50 a person. Multiply that by the number of bankruptcies to be filed this year, and you see a sizable pot of money for credit counselors, coming from the pockets of people who admittedly can’t pay their existing bills.
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