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In light of the proposed

by Carolyn Elefant on March 27, 2005 · 6 comments

in Ethics Issues, Mistakes/What NOT To Do, Practice Areas

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In light of the proposed bankruptcy legislation that would make credit counseling a mandatory prerequisite to a bankruptcy filing, a few of my solo colleagues have considered offering debt reduction services as part of their practice.  For those considering this option, be sure to read David Giacalone’s post about what can go wrong with debt reduction services. David writes about an attorney now under prosecution for fraudulent debt reduction services as well as the FTC’s recent crackdown on three debt reduction businesses engaged in deceptive practices.

Unlike David, I believe that debt reduction (if done correctly) does require legal skills – lawyers can play a valuable role in using negotiating skills to bargain down debts with creditors or possibly come up with ways to challenge creditors’ claims.  I just hope that attorneys who enter the debt reduction business are motivated as much by a desire to help financially vulnerable individuals who have no choice but to seek credit counseling as they are to capitalize on a potentially new practice area that may soon be ripe for harvest.

  • Bryan Gates

    I think it will be difficult to offer meaningful debt reduction or credit counseling services to clients. Most of the heavily advertised ones are non-profit in name only. Local Consumer Credit Counseling Services tend to be truly non-profit and are supported in part by groups such as the United Way. I’m not sure how I can compete with a service that charges about $20 for a consultation.
    Also large creditors such as MBNA and Citibank are impenetrable bureacracies that are not responsive to debtors or their attorneys. In the time it would take me to contact creditors to propose workouts I could have prepared and filed a bankruptcy petition.
    If this truly creates a new playing field we have no choice but to adapt, but I am waiting to see where this credit counseling will come from.

  • Bryan Gates

    I think it will be difficult to offer meaningful debt reduction or credit counseling services to clients. Most of the heavily advertised ones are non-profit in name only. Local Consumer Credit Counseling Services tend to be truly non-profit and are supported in part by groups such as the United Way. I’m not sure how I can compete with a service that charges about $20 for a consultation.
    Also large creditors such as MBNA and Citibank are impenetrable bureacracies that are not responsive to debtors or their attorneys. In the time it would take me to contact creditors to propose workouts I could have prepared and filed a bankruptcy petition.
    If this truly creates a new playing field we have no choice but to adapt, but I am waiting to see where this credit counseling will come from.

  • Al

    I do not think there will be any more of any opportunity for debt reduction services for the following reason. The bankruptcy bill will only strengthen the hand of creditors. They will be emboldened. The resist debt reduction ow as it is. When the new law passes, they will be happy to let you go into bankruptcy because of the new protection for creditors in the bill. So many more people will have to file Chapter 13, that creditors will be happy to take Ch. 13 payments rather than waste time with debt reduction negotiations. If anything, the new bill may wipe out what’s left of any debt reduction practice.

  • Al

    I do not think there will be any more of any opportunity for debt reduction services for the following reason. The bankruptcy bill will only strengthen the hand of creditors. They will be emboldened. The resist debt reduction ow as it is. When the new law passes, they will be happy to let you go into bankruptcy because of the new protection for creditors in the bill. So many more people will have to file Chapter 13, that creditors will be happy to take Ch. 13 payments rather than waste time with debt reduction negotiations. If anything, the new bill may wipe out what’s left of any debt reduction practice.

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