Sunday, August 12, 2007

Counselor shortage: Bankruptcy filers face delays

A new era of bankruptcy law begins today amid fears that a lack of qualified credit counselors could lead to major service delays and paid "counseling'' conducted solely by phone or automated Internet programs.

Under the new U.S. bankruptcy law, people seeking personal bankruptcy must first attend mandatory credit counseling at approved agencies.

But a Herald review shows that only one Massachusetts-based credit counseling agency has been approved so far that can provide in-person counseling for local people seeking bankruptcy.

And that firm - Community Service Network Inc. of Stoneham - admits it's currently understaffed and needs infrastructure improvements to handle inquiries from potential customers.

Meanwhile, the five other credit counseling agencies approved to do business in Massachusetts are based in Georgia, Texas, Michigan and California - and anyone using their $50 or more counseling services will have to do so via phone or Internet.

"There's a lot of disorganization and a lot of scrambling going on,'' said Travis Plunkett, legislative director of the Consumer Federation of America. "It could take months or longer to work out (the problems) in this new system.''

Plunkett expressed concern that those who want face-to-face counseling won't be able to get it - and those who prefer phone calls may find service lines jammed.

"There absolutely could be a shortage'' of approved credit counselors, said Deanne Loonin, an attorney with the National Consumer Law Center in Boston. "We have some pretty serious concerns.''

The U.S. Trustees, an arm of the Justice Department that is overseeing the program, has approved only 50 credit counseling agencies nationwide to handle the mandatory counseling services. More are expected to be approved in coming weeks and months.

But the Internal Revenue Service has said it may move to yank the nonprofit status of the largest credit-counseling agencies - a move that could further strain the new system as it struggles to get off the ground.

Jane Limprecht, a spokeswoman for the U.S. Trustees, said her office doesn't think there will be major problems in coming weeks. She added the U.S. Trustees are working hard to implement tough counseling requirements and guidelines.

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