We periodically get questions about credit counseling and debt management programs on this forum and invariably someone offers the advice of..."make sure you go with a court approved program". However, I think some clarification is in order about that "court approval" fact...
Background
One of the new requirements of the BK law is that all debtors must participate in a Pre-BK Credit Counseling Course within 180 days before they file BK. These courses are offered by Credit Counseling Companies that also offer their own debt management programs. The intent of congress (or I should say, the intent of the credit card companies) in drafting this new requirement was to try to steer those persons away from BK that could probably afford a debt management program. On a side note, that intent was based on a faulty assumption (i.e. that old-law debtors were largely abusing the system) we have since learned that less than 5% of participants in the Pre-BK course would qualify for the debt management program...but that is neither here nor there.
The Problem
The BK code outlines certain requirements for the course, but it is largely the U.S. Trustee that overseas the Pre-BK CC course. Any company wishing to offer a Pre-BK course must submit their application to the local U.S. Trustee for approval. So, the first clarification is, the Pre-BK CCC is "not" court approved, but is approved by the U.S. Trustee for your region. (but that is a minor point).
The MAJOR POINT is that the U.S. Trustee ONLY approves the Pre-BK course that the Credit Counseling Company offers...the U.S. Trustee DOES NOT otherwise approve, audit, investigate, or in any other way validate the actual debt management programs these companies offer.
Thus, do not necessarily consider "Trustee Approved" companies as any more legitimate than any other credit counseling company because the trustee does not investigate the underlying quality of their debt management programs and fee structure.
However, as a practical matter, most of the companies approved by the Trustee probably do offer legitimate debt management programs...but I do not want you to go in to talk with one of these companies about their DM programs with a false sense of confidence simply because the Trustee has only approved the company's Pre BK CC Course. Be skeptical and ask questions. (also, keep in the back of your mind, most people who go into DM programs end up filing BK eventually, so really consider if a DM is right for you. The reason most people go on to file BK after a DM Program is that by the time a person gets out of denial and takes action on their financial affairs and visits a DM company, it is usually too late for DM to work).
Background
One of the new requirements of the BK law is that all debtors must participate in a Pre-BK Credit Counseling Course within 180 days before they file BK. These courses are offered by Credit Counseling Companies that also offer their own debt management programs. The intent of congress (or I should say, the intent of the credit card companies) in drafting this new requirement was to try to steer those persons away from BK that could probably afford a debt management program. On a side note, that intent was based on a faulty assumption (i.e. that old-law debtors were largely abusing the system) we have since learned that less than 5% of participants in the Pre-BK course would qualify for the debt management program...but that is neither here nor there.
The Problem
The BK code outlines certain requirements for the course, but it is largely the U.S. Trustee that overseas the Pre-BK CC course. Any company wishing to offer a Pre-BK course must submit their application to the local U.S. Trustee for approval. So, the first clarification is, the Pre-BK CCC is "not" court approved, but is approved by the U.S. Trustee for your region. (but that is a minor point).
The MAJOR POINT is that the U.S. Trustee ONLY approves the Pre-BK course that the Credit Counseling Company offers...the U.S. Trustee DOES NOT otherwise approve, audit, investigate, or in any other way validate the actual debt management programs these companies offer.
Thus, do not necessarily consider "Trustee Approved" companies as any more legitimate than any other credit counseling company because the trustee does not investigate the underlying quality of their debt management programs and fee structure.
However, as a practical matter, most of the companies approved by the Trustee probably do offer legitimate debt management programs...but I do not want you to go in to talk with one of these companies about their DM programs with a false sense of confidence simply because the Trustee has only approved the company's Pre BK CC Course. Be skeptical and ask questions. (also, keep in the back of your mind, most people who go into DM programs end up filing BK eventually, so really consider if a DM is right for you. The reason most people go on to file BK after a DM Program is that by the time a person gets out of denial and takes action on their financial affairs and visits a DM company, it is usually too late for DM to work).
Comment