The Bankruptcy Abuse and Consumer Protection Act was passed in early 2005 with the overwhelming support of the President, both houses of Congress and the major credit card companies. The law, which created sweeping changes in American bankruptcy law, was passed in order to reduce the possibility that consumers with heavy debts might avoid choose to avoid paying them by seeking debt relief through the courts. The Act has many provisions, but the one that may hurt consumers the most was the one provision that was intended to help the requirement that debtors undergo mandatory credit counseling before filing for bankruptcy.

On the surface, the requirement seems to be laudable. Few people ever receive any sort of formal money management training, so a bit of counseling, even as bankruptcy approaches, might help debtors avoid further financial trouble in the future. The law was passed with the intention that, once educated, consumers would stay out of bankruptcy court in the years to come.

It hasn't worked out that way, and the bankruptcy law is largely to blame. The law did not set a fee for this required credit counseling, but a fee of $50 was suggested and consumers who cannot afford to pay the fee may ask to have it waived. Only certain nonprofit counseling agencies would be approved for pre-bankruptcy counseling. These requirements have resulted in a mess in the counseling industry that benefits virtually no one. Relatively few agencies have been approved; the ones that have are very busy. The suggested fee of $50, when paid at all, is not enough to cover the costs of keeping the agencies' offices open. Consumers are ending up getting their "counseling" via the Internet, or a conference call, or in a large group meeting. This sort of thing may satisfy the requirements of the law, but it isn't helping the people it was intended to help.

Credit counseling is certainly a worthwhile endeavor, but only if done properly. The counselor and the client should have sufficient time to become acquainted, discuss an overview of the counseling process and to have an in-depth discussion of the client's specific financial situation. After all, if the client cannot receive information that he or she can apply directly to his or her own finances, the entire point of providing the service becomes rather moot.

Instead, we have a situation where the clients are being poorly served and the counseling agencies are barely scraping by financially. It seems unlikely that this is what Congress had in mind when they passed the bill. Anyone who has a problem with debt would certainly benefit from counseling and is encouraged to seek it out. Those who do would be advised to select a counseling agency that has the time and resources to provide the in-depth sort of help from which a client can actually benefit. Otherwise, the result is a waste of time for all involved.