In order to file for Chapter 7 or Chapter 13 bankruptcy, you first have to be judged eligible. Part of the eligibility requirements is that first go through a credit counseling program. Many critics believe that this requirement is simply a way to reward credit counseling companies with more profits by mandating that consumers attend their classes.
It used to be that if you wanted to file for bankruptcy, you had to seek help from a non profit agency. With the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005, however, agencies that charge a fee were allowed into the program. But, whether you choose paid or free, the bottom line is that you have to take a credit counseling course.
The purpose of having to attend one of these classes is to give you an opportunity to determine if bankruptcy is the best option for you. The assumption is that since you are having difficulties with your finances, you probably don't have a good handle on the best ways to manage money. Taking the course may give you other, less drastic, options of dealing with your financial problems than filing for bankruptcy. If so, everyone comes out ahead - you, your creditors, and the bankruptcy court system.
Those who criticize the system, however, feel just a bit different about how the current system works. A main reason given is that no distinct standard exists that defines the type of training the various counselors be proficient in. Not only that, but the kinds of places where the training sessions are held vary according to where you happen to live. For instance, some will demand that you come into the office for training. Others will only offer telephone consultations. And still others, handle the entire process via the Internet. In addition, the fee structures are not consistent either. The only guidance that the government gives is that the charge be reasonable. Beyond that, the company can charge whatever they want.
Still other critics charge that, in the majority of cases, no actual real counseling takes place. The company merely gives you some boilerplate materials and call it a day, with the consumer being none the wiser for the money he has just spent.
As stated before, however, you basically have no choice. To avoid becoming frustrated, the best way to consider this is as an additional filing fee that you have to pay in order to file for bankruptcy. If you get some worthwhile financial information out of your counseling session, good. If not, it is just an extra nuisance fee that you have to put up with.
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