The more I think about that old country song “Looking For Love In All The Wrong Places”, the more it reminds me about how people overwhelmed by money problems try to get help in some of the wrong places. As a bankruptcy attorney in Indiana for so many years, I know these poor people are merely postponing and avoiding facing up to their problems, rather than taking the action steps to turn things around.
In a former blog I talked about Debt Settlement Agencies, and why these are almost never a good solution or even a good first stop. A second type of place many people turn to when they need debt help is a credit counseling service. In fact, whenever I tell someone at a social or business gathering what I do for a living, namely that I’m an Indiana bankruptcy attorney , the next question out of their mouths is often “Isn’t it better for someone to first try a credit counselor before filing bankruptcy?”
I need to remind you that I never deal in absolutes, saying one solution fits all people who need debt help. And so, rather than getting all excited about why one course of action is “the best”, I always stop and realize that the person asking the question probably doesn’t understand what credit counseling actually is. Credit counseling agencies are supposed to offer education about good financial habits, advising folks on sticking to a budget, being faithful about paying bills on time, and the like. What is supposed to be secondary, but often is the main kind of advice offered (for a fee, I might add), is negotiating with creditors in the same way that debt settlement agencies do. In other words, the counseling agent talks to the credit card company to try to get that company to settle for a lower monthly payment or even a lump sum that is less than the amount really owed.
It’s important to know, by the way, that credit counseling agencies were examined recently by the IRS (you can read about this on the IRS website at www.irs.gov) and largely found to have failed to do the public enough good to qualify as tax-exempt agencies. The investigators found that many agencies were too closely tied to for-profit credit companies and were more interested in benefiting them than the clients. However, even if a credit counseling service does a good job, it may still not be the best place to go, for two reasons:
First, people with serious debt problems need to know all their options, and that includes legal options which only a bankruptcy attorney is qualified to discuss! An experienced bankruptcy attorney can offer counseling on managing money and budgeting, but a credit counseling service is not allowed to offer legal advice. They can’t talk about Chapter 7 or Chapter 13, about lawsuits people are facing or even about foreclosure on a home. Only attornies can offer complete bankruptcy information and bankruptcy services.
The second important reason is time. When late fees and penalties are piling up by the day and creditors are calling you at home and at work, time is of the essence. It’s crucial that you get legal advice quickly and select a course of action. This may or may not include filing a bankruptcy petition, but if you had gone first to a credit counselor and paid a fee, precious time would have elapsed, closing off some options.
Real life statistics bear out what I’m saying about avoiding delay. The majority of people in Indiana who come to me considering bankruptcy are not financially irresponsible people. They never have been. “Life happened” to them. Either a serious illness in the family occurred, with tens and sometimes hundreds of thousands of dollars in hospital and treatment bills, a breadwinner was laid off from work, and sometimes there is an unexpected and expensive divorce going on. Very often it’s a combination of more than one of these things. Counseling on how to manage a budget isn’t really going to help in these cases, and meanwhile, the bills are mounting every day.
So, what I really want to say to people is this: Don’t look everywhere before coming back to where you should’ve started in the first place. As bankruptcy attorneys in Indiana, I and the other attorneys in my office are first and foremost counselors. That’s precisely what we do every day of the week. But, unlike debt settlement agencies or credit counseling bureaus, we can help you look in all the right places for a plan that fits you and the situation you’re in, and we can help you do it right now!