A bankruptcy credit counseling session
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Glenda White, bankruptcy counseling manager at the Central Florida office, has found that the new bankruptcy law is confusing for most clients.

"As an example, we have recently counseled a client who previously went to see an attorney on a pending mortgage foreclosure action," White says. "The client didn't understand the need to receive counseling and waited until the day before their home was going to be sold by public sale."

Last-minute actions, such as a foreclosure, are when counselors tend to see debtors the most stressed. This tension is also seen among senior citizens on fixed incomes. These individuals often face a sudden health setback that causes them to rely on credit cards to pay for their medical expenses.

"A lot of seniors can get by on a little amount of money, but health-care costs can wreak havoc on their budget," says Schram.

White says she has also noticed that in many instances the client's main goal is to get the counseling session behind them, and many clients have opted to use paralegals to cut down on costs.

"Paralegals usually only complete the paperwork side of filing for bankruptcy."

Either way, counseling officials say, too often debtors wait until the last minute to visit a counseling agency to deal with their debt. Consumers are advised to pay close attention to circumstances that may lead them to bankruptcy, such as trouble making the minimum payments, living paycheck to paycheck and using credit cards to pay for basic living expenses. Counselors suggest that upon noticing these signs, debtors should not wait, but seek help right away.

"We find that one of the reasons people wait the longest is avoidance of reality. People keep thinking that it's going to get better, that there's always hope," says Schram. "I think the reason people do that is that they don't realize the seriousness of the situation until some type of action is filed against them. Usually what drives them to bankruptcy counseling is they receive a threatening call from a creditor or a legal notice."

White attributes the avoidance to embarrassment, lack of understanding, not being informed and "that little ray of hope that they have that by some miracle they'll win the lottery.

"A lot of peoples' motive to do something about the debt and receive counseling is panic. From years of doing this, a lot of people feel they will have to go to jail for credit card debt. Some people have that misconception," says White.

"We let them know that there's no debtor prison, we did away with that 300 years ago," Schram says.