Are We All Responding to a False Alarm?
Although I agree that there is a need to have a method whereby attorneys can easily facilitate credit counseling over the internet, I am concerned about some of the anxiety that some folks are causing by over-emphasizing the role credit counseling agencies will play in diverting bankruptcy clients to Debt Management Programs. A couple things I would like to point out in order to balance out what I consider to be an effort to alarm lawyers:
How many clients come to an attorney and say, "I really, really want to file bankruptcy, but tell me a bit about a debt management program"? My point being, that once a debtor is consulting with a bankruptcy lawyer, he has likely already consulted with a credit counseling agency or debt settlement company who has told the him that debt management and/or debt settlement is not a viable option. And, the client is usually only coming to a bankruptcy lawyer as a last resort.
Once the client has paid a lawyer for an initial retainer and possibly a credit report and the briefing, the client is unlikely to abandon the case. Lawyers can even have clients complete paying the entire fee and then have the client take the briefing, further reducing any concern. Or, have the client take the briefing in the lawyer's office with a paralegal sitting close by to answer any preliminary questions.
By credit counselors own admission, less than 3% of those debtors being sent to them for the briefing would even qualify for DMP. By my estimates, even at $30 a piece, assuming a 20% drop in filings in the next 12 months, the new law has carved out a $36 MILLION dollar revenue stream for the credit counseling industry. I don't think the credit counseling agencies are going to want to jeopardize getting as big a piece of that market as possible by sifting off 3% of cases into DMPs. And, if the briefing is completely online, the margin for the counseling agency is almost 100% (minus development and small other overhead costs).
So, my point is, let's not all get alarmed about clients getting stolen by DMPs. And, for the few and far between that go into DMPs, 80% of them fail anyway and the client will likely be coming back to finish the case.
Just some food for thought.
