Credit Card Debt Blog

Credit counseling is a valuable service for consumers who have got problem managing their finances. A distinctly different service from debt consolidation, credit counseling helps consumers with problem debt by educating them about the rudiments of money management. Americans really don’t get the instruction they need about how to manage bank accounts, balance checkbooks, or pay measures on time, and credit counseling can supply these services as well as others. By educating consumers, counselors trust to reduce the number of debtors who are forced to register for bankruptcy. Anyone whose financial state of affairs is such as that they would profit from credit counseling may wish to seek it out in a hurry, however. A number of different factors are coming together in such as a manner that the counseling industry may soon be completely swamped with more than clients than it can handle.

Recently passed bankruptcy legislation, designed to reduce the number of consumer bankruptcy filings, will now do credit counseling compulsory as a requirement for a bankruptcy petition. Anyone who wishes to register for bankruptcy relief must first demonstrate that he or she have undergone credit counseling during the past six months. By requiring counseling as a status of debt relief, United States Congress trusts to reduce or eliminate repetition filers. The counseling industry is preparing for the further clients now, as the new law is put to take consequence in October 2005.

Other factors will weigh heavily on the counseling industry, however. A 2003 law passed by United States Congress necessitates credit card companies to raise their minimum payments so that their clients can refund their balances more quickly. This have resulted in the near-doubling of minimum payments, and the average American household, which have a credit card balance of $10,000, will see their minimum monthly payment rise from $200 to $400. Since many households can only afford the minimum payment now, the tramp in the minimum owed may drive more than Americans into counseling and bankruptcy.

The increased trust upon interest-only mortgages and low-interest adjustable rate mortgages could be a factor, too, if home terms either autumn or neglect to increase as they have. The sky-high prices in many markets have got led homebuyers to purchase more than homes than they can really afford, often using mortgages that are themselves riskier than the traditional 30-year loan. Should interest rates rise or lodging terms fall, 10s of thousands of homeowners will happen themselves with loans that either transcend the value of the home or are unaffordable.

Those in the credit counseling industry state that this is a critical time, and the combination of new laws, delicate markets, and credit card industry inspection and repair could force a number of consumers towards bankruptcy and compulsory counseling. Anyone with problem debt who might profit from counseling should see doing so sooner, rather than later, as qualified credit counselors may be quite busy this fall.