Credit Counseling - Get In Line Now To Avoid The Upcoming Rush
By Charles Essmeier, Thu Dec 8th

Credit counseling is a valuable service for consumers who havetrouble managing their finances. A distinctly different servicefrom debt consolidation, credit counseling assists consumerswith problem debt by educating them about the basics of moneymanagement. Americans really don’t get the education they needabout how to manage bank accounts, balance checkbooks, or paybills on time, and credit counseling can provide these servicesas well as others. By educating consumers, counselors hope toreduce the number of debtors who are forced to file forbankruptcy. Anyone whose financial situation is such that theywould benefit from credit counseling may wish to seek it out ina hurry, however. A number of different factors are comingtogether in such a way that the counseling industry may soon becompletely swamped with more clients than it can handle.

Recently passed bankruptcy legislation, designed toreduce the number of consumer bankruptcy filings, will now makecredit counseling mandatory as a prerequisite for a bankruptcypetition. Anyone who wishes to file for bankruptcy relief mustfirst demonstrate that he or she has undergone credit counselingduring the past six months. By requiring counseling as acondition of debt relief, Congress hopes to reduce or eliminaterepeat filers. The counseling industry is preparing for theadditional customers now, as the new law is set to take effectin October 2005.

Other factors will weigh heavily on thecounseling industry, however. A 2003 law passed by Congressrequires credit card companies to raise their minimum paymentsso that their customers can repay their balances more quickly.This has resulted in the near-doubling of minimum payments, andthe average American household, which has a credit card balanceof $10,000, will see their minimum monthly payment rise from$200 to $400. Since many households can only afford the minimumpayment now, the hike in the minimum due may drive moreAmericans into counseling and bankruptcy.

The increasedreliance upon interest-only mortgages and low-interestadjustable rate mortgages could be a factor, too, if home priceseither fall or fail to increase as they have. The sky-highprices in many markets have led homebuyers to purchase morehomes than they can really afford, often using mortgages thatare themselves riskier than the traditional 30-year loan. Shouldinterest rates rise or housing prices fall, tens of thousands ofhomeowners will find themselves with loans that either exceedthe value of the home or are unaffordable.

Those in thecredit counseling industry say that this is a critical time, andthe combination of new laws, fragile markets, and credit cardindustry overhaul could push a number of consumers towardsbankruptcy and mandatory counseling. Anyone with problem debtwho might benefit from counseling should consider doing sosooner, rather than later, as qualified credit counselors may bequite busy this fall.

About the author:©Copyright 2005 by Retro Marketing. Charles Essmeier isthe owner of Retro Marketing, a firm devoted to informationalWebsites, including End-Your-Debt.com, a site devoted to debtconsolidation and credit counseling, and HomeEquityHelp.com, asite devoted to information regarding mortgages and home equitylending .