Counselors report pace of call-ins is rapid

11/9/2005

Business is brisk for the companies nationwide chosen to provide credit counseling to debtors contemplating bankruptcy, but consumer advocates aren t convinced the sessions will be productive.

We ve been very busy, said Dee Ann Chandler, of California s Springboard Nonprofit Consumer Credit Management Inc., reporting more than 4,000 phone calls have been logged since a bankruptcy reform law went into effect Oct. 17.

Gay Martin, of Consumer Credit Counseling Service of Greater Atlanta Inc., said: Our Web traffic has just really, really picked up.

Its new section detailing the pre-filing process received 6,500 page views last week.

As one of the provisions of the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005, people preparing to file for bankruptcy must first undergo credit counseling.

The counseling is supposed to teach about the bankruptcy process and provide alternatives to filing. It also is supposed to explain how the filers may have gotten into their financial problems and how to try to prevent the same mistakes.

The course participant obtains a certificate that must accompany a bankruptcy filing.

Most of the counseling, costing about $50, is to be done by phone or online.

The idea of the counseling and helping people recognize what led to their problems is admirable, but it likely is too late in the process, said Travis Plunkett, legislative director of the Consumer Federation of America.

Requiring many people on the brink of bankruptcy to get counseling might not be helpful and could actually delay filing for those people who genuinely need it, he said. Earlier intervention is often the key.

He questioned whether people are able to get through to the agencies and whether they are told the law requires free counseling for those who cannot afford the fee.

He said in-person counseling is not being offered as much as is needed.

Ms. Chandler, of Springboard, conceded her firm has had trouble with dropped calls and has extended its hours and added staff to the phone banks.

Agencies approved for the counseling vary by state. At the time the reform law took effect, Ohio had five and Michigan had four. All were out of state, which meant no face-to-face counseling.

Included were Springboard, Consumer Credit Counseling of Atlanta, and Money Management International Inc., in Houston.

However, other agencies were trying to be certified.

For a current list of which counseling firms can be used, check this Web site: http://www.usdoj.gov/ust/bapcpa/ccde/index.htm. Click on Approved Credit Counseling Agencies and then click on either Ohio and view the list marked OHN or Michigan and view the list marked MIE.

Consumer Credit s Ms. Martin said most visitors to the pre-filing section on its Web site use a two-part Internet counseling session, which first gathers financial information and then has a counselor ask questions.

The counselors, she explained, are to try to discover the root cause of the financial problems, such as overspending or an event like a job loss, divorce, or illness.

In our experience, overspending is in the minority, she said. In most cases, there s been some sort of catastrophe.

At Money Management, an executive said counselors handled 1,400 nationwide calls by the middle of last week.

Most were from debtors who had talked with an attorney about filing and were told they needed credit counseling, said Catherine Williams, a vice president.

Her firm mostly teaches old-fashioned budget counseling on the telephone.

It reviews spending patterns, tax-withholding strategies, and where the monthly paycheck goes, she said.

Counselors then work up a report on a debtor s options, which could include bankruptcy.

It s trying to help people make important decisions based on realistic information, Ms. Williams said.

Contact Mary-Beth McLaughlin atmmclaughlin@theblade.com or 419-724-6199.