How Can Debt Counseling Help Consumers And When Do You Need It?

When it comes to debt counseling, especially in the US, the numbers are staggering:

It is estimated that 9 million Americans contact debt counseling agencies annually and industry officials estimate that 2 million consumers are on active credit repair programs at any one time.

Consumer debt is approaching $2 trillion and millions of Americans are in serious financial trouble. It is now believed that the average American household has nine credit cards, and the credit card industry claims that the average card balance is $7,000.

Worry about the scale of these debts has provoked financial lobbyists and corporations to press for new bankruptcy laws as protection. In April 2005 Republicans and Democrats from the reddest and bluest states agreed to support S.256, the 'Bankruptcy Abuse Prevention and Consumer Protection Act', which was approved by the House of Representatives on a 302-126 vote. It passed the Senate in March 2005 by 74-25.

The purpose of this law is to put in place tougher restrictions on declaring bankruptcy, preventing criminals and deadbeats from escaping their obligations by filing for Chapter 7 or 13, and starting over again.

The new law requires consumers to go through debt counseling before filing for bankruptcy. This started in October 2005. Coupled with the ongoing IRS crackdown on questionable debt agencies, there may be a shortage of legitimate assistance.

It has to be noted that any attempt to clampdown on dubious practices is a good thing. The people that suffer are almost always in a vulnerable situation. However, for those genuine folk with debt problems, this new law will likely make a bad situation even worse.