Credit Counseling Is A Useless and Mean Requirement In Chapter 13 Cases

Congress decided in 2005 to revise the Bankruptcy Law and make credit counseling a requirement. In my nearly 20 years of working in the legal field, I have never seen nor heard of a single case of any person who has ever saved their home because of a credit counselor. While untrained counselors who work off of scripts may offer some marginal benefit to a renter with credit card debt, the entire process of counseling is totally useless to the homeowner with mortgage arrears. Yet, Congress imposed this requirement for bankruptcy. Many believe it was done to put “gatekeepers” in place to prevent abusive filings. But who are the gatekeepers? What qualifies them to do this and have they really helped anyone with a mortgage default?

Failure to comply can have serious consequences. Courts are debating whether to strike a case or to dismiss it when the counseling certificate has not been filed. Dismissal is serious because the automatic stay protections are limited in repeat filings under the new laws.

One court has noted the particularly harshness of the counseling requirement, noting that there are some circumstances where counseling would be an “empty charade.” See, In Re: Lena M. Elmendorf, www.websupp.com/data/SDNY/7:06-cv-06040-7-SDNY.pdf.