In a press release issued today, the the National Foundation for Credit Counseling (NFCC) commented on the first year of mandatory credit counseling before filing bankruptcy as a result of Bankruptcy Reform legislation passed in 2005 that requires all debtors to receive credit counseling before they file for bankruptcy.

Some of their key findings:

– Through the first 11 months of the new law, NFCC members delivered 563,494 bankruptcy counseling and education sessions and issued 630,422 certificates.

– Consumers filing for bankruptcy were “upside-down” financially, with average unsecured debt being $11,599 greater than average annual income and the unsecured debt to income ratio has deteriorated since the April NFCC report.

– Mortgage delinquency was more prevalent for consumers filing for bankruptcy than for those receiving non-bankruptcy counseling.

– Phone and Internet counseling continue to be the predominant choice for services.

The full press release can be read here. Clearly the cost of providing the mandatory credit counseling is more expensive than originally anticipated, so further changes to the rules are possible. Stay tuned to this credit counseling Blog for updates as they become available.

There are two types of credit counseling service: for profit, and not for profit.A for profit service exists to make a profit. This does not mean they are bad, but it does mean that their primary objective is to make a profit.

A non profit credit counseling service, as the name implies, does not exist to make a profit.

They exist to provide a service to you, and to get you back on track financially. In many cases a non-profit credit counseling agency will spend more time with you, and they will emphasize budgeting and personal money management. They will take the time to teach you the skills necessary to help you avoid financial problems in the future, which of course is the reason for going to credit counseling in the first place.

As with all service providers, meet with person who will be working on your case, and decide for yourself if the person you are working with can help you achieve your goals.

It is a sad but true reality: we do not do a good job of educating students about money, debt and credit.  We teach them how to spend, but we don’t teach them how to use credit wisely.
For that reason, credit counseling, particularly learning to budget, is a great skill for students to learn.  In fact, many non profit credit counseling organizations run seminars for students at local high schools, colleges and universities to help them learn how to budget.
If you have a student in your family, encourage them to learn money management skills while they are still young!

Many people are intimidated and embarrassed by the credit counseling process. To get you started, and to make sure you are fully informed, here are some questions to ask your credit counselor

1. What services do you provide? Some consumer credit counseling services only prepare Debt Management Programs to help you repay your debts. Others are full service, and also offer budgeting advice and credit repair services.
2. What qualifications do you have? You want to deal with an accredited counseling agency, and preferably with a credit counselor with many years experience.
3. What do you charge? Are you a non profit credit counseling service?All reputable credit counseling agencies will disclose their fees in full up front; if they don’t, go to another service.
4. Will my personal information be kept confidential? Most credit counseling services have a confidentiality and security policy, to prevent your personal information from being disclosed inappropriately.

You are the consumer, so be sure you understand the process before you start your credit counseling.