| |
| New
bankruptcy law requires credit counseling | | |
| Topics covered
in the briefing include examining the underlying causes of a consumers' financial
problems; a look at their budget, in terms of their income and expenses; helping
them understand the debt-to-income ratio; providing guidance as to whether a debt-management
plan will help the consumer; and the consequences of filing for bankruptcy and
other alternatives to bankruptcy, according to Gail Cunningham, vice president
of business relations with Consumer Credit Counseling Service of Greater Dallas,
an agency that has applied to provide these classes.
If a consumer works with a credit
counseling agency's counselor who believes they could benefit from a debt management
plan and draws one up, that plan must be included with the consumers' bankruptcy
petition, even if the consumer doesn't believe he has the ability to meet the
obligations of such a plan. The
timing issue
Consumer advocates question whether
this credit counseling briefing will really help consumers. "The question
is whether the timing is right -- is this a good time for a consumer to receive
counseling or not," Plunkett says. "When they get to this point, most
consumers have already made the mental decision to seek bankruptcy because, in
most cases, they learn about this provision through their bankruptcy attorney.
"So we wonder whether it is too late, because most people
at this point face imminent financial calamity," he says. "Timing is
everything in credit counseling. If there is early intervention, it can work,
but if people get it after they have been laid off, for example, they won't have
regular income and can't benefit." Financial
management
The back end of the twin requirements
is a two-hour personal financial management education class that consumers must
attend before a bankruptcy can be completed, or debts discharged, in industry
lingo. According to the U.S Trustee's Office, the curriculum for this class must
include: - Budget development: Learning how to set
short and long-term financial goals, the difference between net and gross income
and classifying expenses as "fixed, variable or periodic."
- Money
management: Learning to keep good financial records, how to comparison shop, differentiate
between wants and needs, types of insurance and what coverage is necessary, and
the difference between short- and long-term savings.
- Using
credit wisely: Learning the types and sources of loans and credit; identifying
potential credit problems, how to use credit appropriately and understanding credit
ratings.
- Consumer information: Learning about consumer resources,
consumer laws and regulations.
This class also will have
a fee, which hasn't been specified yet, although agencies can't turn away anyone
because of their inability to pay. If a couple is filing for bankruptcy, each
individual must take both courses and receive individual certificates, which means
double fees in many cases. |
