Mandatory Credit Counseling Before Bankruptcy Filing

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If you're reading this article right now I'm sure that you are looking for a debt elimination system that will help you get out from under you personal mountain of debt. Hopefully you're not looking for the magic pill that will suddenly dissolve your debt problem. I'm afraid that I have to tell you that there is no magic debt elimination system.

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Mandatory Credit Counseling Before Bankruptcy Filing
Most Americans are aware of the sweeping changes in U.S. bankruptcy law that were made by Congress recently. These changes, strongly supported by the credit card industry, were designed to make it more difficult for Americans to file for bankruptcy under Chapter 7 of the Federal bankruptcy code. Chapter 7 allows consumers to essentially have all of their debts wiped away by the court. While many people will still be able to file under Chapter 7, many more will have to file under Chapter 13, which requires the establishment of a repayment plan. A less publicized provision of the bankruptcy bill is the one that requires debtors who are considering filing for bankruptcy to first undergo credit counseling. What does this mean for consumers?

Actually, the details are not yet known. The law, which takes effect on October 17, 2005, does require that debtors considering bankruptcy receive credit counseling at least six months before filing for bankruptcy. The law also requires that they receive additional counseling before the case is finalized and that any agency providing counseling services must charge an undefined "reasonable fee." Other than that, there are no details yet. The portion of the law that deals specifically with credit counseling hasn't yet been written, and the full details are not expected to be released until mid-summer. Even those who work in the credit counseling industry do not know what will be expected of them once the law takes effect.

For consumers with problem debt, this confusion is only making a bad situation worse. In the Fall, more steps will be required of those filing for bankruptcy, but no one knows what those steps are, what they will cost, or how involved they will be. Anyone who has a current financial situation that they feel may lead to bankruptcy would be well advised to consider filing now. Bankruptcy should be considered a last resort for those with problem debt, as a bankruptcy filing will stay on a credit report for at least ten years. If bankruptcy appears inevitable, however, filing now will probably be easier, cheaper, and faster than filing after the new law takes effect in October.

©Copyright 2005 by Retro Marketing.

Charles Essmeier is the owner of Retro Marketing, a firm devoted to informational Websites, including End-Your-Debt.com, a site devoted to debt consolidation and credit counseling, and StructuredSettlementHelp.com, a site devoted to information regarding structured settlements.

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Debt consolidation - Say yes to less debt

Feeling stressed by the amount of debts you have? Three years ago Michelle was struggling on a nurse's salary. She had run up huge debts with a number of court judgments against her name. She longed to travel - a dream that she kept telling herself was impossible. It was clear to Michelle that she couldn't continue to run up debt, yet on payday she would rush out and buy new clothes to cheer herself up.

Becoming more and more stressed about her debts meant that she frequently slept badly and was not fresh for work, which resulted in time off sick. She was unable to work any overtime because she was always too tired. She kept asking herself, Why is it so difficult for me to save instead of spending all my money? The same answer came back every time: Because you spend more money than you are earning!

When Michelle was finally ready to listen to the answers from her own conversations, she acknowledged that she needed to stay away from shops so that she physically couldn't spend her money. She knew that, by continuing to shop, she would sabotage her dream of financial security and travelling abroad.

Michelle had warning signs almost every day in the shape of bills and credit card statements. She began to dread the post arriving. Finally, she gave in to the situation and called me. As you know, she said, I bought a new car a few months ago, which I hardly use now. The bank has just bounced my payment this month and I can't see how I'll be able to make the payment within the next seven days.

She had not realised how much debt she had incurred. Short of winning the lottery, she accepted that she couldn't change her level of debt immediately. Michelle didn't deliberately put STOP signs in her life to prevent her dream happening. She simply hadn't stopped to think about the consequences that her spending would have on her dream to travel.

Even though you may know what really matters to you, you may put all sorts of barriers in place, which firmly STOP you from achieving what you really want to do. Have you longed to make changes, to find that you have been stopped just as you got started, or even beforehand?

In facing her financial situation honestly, Michelle could see how long it would take her to be debt-free. For the first time in her life, she took time to look at her outgoings as well as her income.

Michelle accepted that she had let things slide too far, and she was determined to avoid bankruptcy. She changed her spending habits and decided what was important in her life (no debt and all the stress associated with it; being able to travel). Three years on, she is working in Australia, with an apartment by the beach, having paid off all her debts. Now, most of her days are stress free.

If you find you are in debt, don't bury your head in the sand - debt does not go away. It is important to deal with the problem before it escalates out of control.

Speak to a friend, family member or a professional advisor and then act on sorting out the debt. Prioritise repayments on essential services such as mortgages and utility bills.

If you are paying off a range of credit cards pay off those with the highest rate of interest first.

About The Author:

Carolyn Matheson is Author of "Yes to Less Stress" To receive her free weekly newsletter, sign up today: http://www.areustressed.com/newsletter-signup.htm


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Mandatory Credit Counseling Before Bankruptcy Filing
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