Although under current bankruptcy laws, the federal government has made it a requirement in the vast majority of cases, some have become skeptical towards the usefulness of credit counseling. While the Bankruptcy Abuse Prevention and Consumer Protection Act was passed in 2005 and has not seen significant amendments addressing the issue, a 2007 study done by the Government Accountability Office has cast doubt over credit counseling's ability to actually help a debtor.
According to the Government Accountability Office, which serves as an agency to check whether laws are actually working or not, the credit counseling requirements put in place by BAPCPA in 2005 have yet to show whether or not they are actually effective in reducing bankruptcy rates in the United States. The organization filed their findings and recommendations in 2007, asking the government primarily to establish a way to measure success or failure in counseling sessions. Prior to this report, there was no federal method of determining if credit counseling had any effect on a family's finances.
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While the government went through with that recommendation, the larger warning provided by the study has not warranted action. Through their investigation of the altered bankruptcy law, this study concluded that counseling may actually just serve as an administrative deterrent to bankruptcy, and have no useful function at all. Considering that most people filing bankruptcy are in such deep debt or financial disarray, credit counseling seemed to prove nothing but a waste of time.
Considering that a large part of BAPCPA changes were made in order to make bankruptcy a more intensive process overall, as well as funnel debtors through a system that would be less willing to completely discharge debts, part of the reason these recommendations have been ignored could be due to their fulfillment of that aim. Counseling offers some less aware debtors with a sort of education concerning their financial state, regardless of ability to help with the burden of debt. In some ways, this follows the spirit of law closely.
To learn more about bankruptcy and credit counseling, contact a bankruptcy attorney.
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