Bankruptcy credit counseling gets mixed reviews
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Debtors incapacitated, disabled or on active military duty in a military combat zone, as defined by law and the courts, will not have to participate in either counseling course.

The court can waive the counseling requirements if, upon application to the court, the debtor can show a need for urgency and that he or she was not able to obtain counseling within five days of the initial request. If the debtor is granted the waiver, he or she must be counseled within 30 days of the filing, 45 days in special circumstances, or the case will be dropped.

Credit counseling agencies that want to offer bankruptcy counseling are required to be nonprofit, meet bonding requirements if they handle clients' funds through debt management plans, charge a reasonable fee, and provide adequate counseling by trained counselors without regard to ability to pay, according to the U.S. Trustee Program.

While the nonprofit status is a criterion for approval as a credit counseling agency, it isn't necessary for approval to be a personal financial management education course provider.

Determining costs
Questions about the costs of counseling continue to arise. The law says that agencies must charge a reasonable fee and counseling must take place regardless of ability to pay. However, a fee has not been set by the U.S. Trustees.

"Various recommendations and concepts are under consideration," says Jane Limprecht, a spokeswoman for the U.S. Trustees in Washington, D.C.

Consumer advocates claim that some agencies have not told debtors they could waive the fee. Advocates believe this may cause some consumers to "needlessly" be delayed or inhibit them from the counseling and bankruptcy altogether.

They are also concerned that agencies may only encourage those who have the ability to pay the fee to seek counseling.

The advocates have asked the U.S. Trustees to make sure all approved agencies make consumers aware that fees may be reduced or waived on their Web sites and when the consumer initially contacts the agency, and also make consumers aware, on their Web sites, of distinct criteria for reducing fees or granting a waiver and the documentation necessary to do so.

The U.S. Trustees "did mention the disclosure of the free counseling," says Deanne Loonin of the National Consumer Law Center in Boston. But, she says, the department has not provided guidance as to what the disclosures should say or who should be getting fee waivers.

However, Limprecht says, the U.S. Trustee program is reminding all providers of the legislative requirements. She says it is also receiving input from a number of constituencies on practices, issues and future guidance needs.

Susan Keating, CEO of the National Foundation for Credit Counseling, the nation's largest and oldest nonprofit credit counseling service, says that although the U.S. Trustees office has indicated that fees should average $50 at the most, the actual counseling costs are more.

"The cost to deliver a face-to-face 60-minute session averages over $100," says Keating. "We are talking about a gap here in the funding. We are all trying to figure out how to deliver the services within what is intended in the new law."