Former Bankruptcy Petitioners Not Qualified to be Credit Counselors?
A Texas Bankruptcy Judge is holding a hearing today to get input from the U.S. Trustee’s office on whether or not one of the nation’s largest credit counseling agencies remains qualified to provide pre-bankruptcy credit counseling briefings. The issue arose after the Judge heard a high-ranking representative of the agency state that they maintained a policy prohibiting the employment of any credit counselor who had been in bankruptcy. Such a policy, if it was accurately described, would seem to violate section 525 of the U.S. Bankruptcy Code, which prohibits private employers from discriminating on the basis of a past or current bankruptcy filing.
It seems likely that the company will retain its U.S.T. approval, but the issue raises larger questions for everyone involved in the consumer bankruptcy process. Section 525 aside, what is a credit counseling agency that maintains such a policy saying to its customers—and to your clients? The agency is charged with the responsibility of helping consumers in financial crisis find the solution best suited to their particular needs, but if the company is indeed making this kind of blanket judgment about people who have filed for bankruptcy protection, doesn’t that call into question that agency’s ability to give impartial advice about the best course of action for each individual debtor? There appears to be no policy prohibiting the employment of credit counselors who have previously participated in a debt management plan, although debt management plans result from many of the same types of financial problems that trigger bankruptcy filings.
Consumer bankruptcy clients are often already discouraged, demoralized, and feeling guilty. They need to work with providers who understand their situations and are compassionate, empathetic, and committed to helping them find the best possible solution under their difficult circumstances. We would hate to think that an agency charged with providing that support might automatically disqualify anyone who might be able to identify and empathize with those clients based on shared experience and his own successful financial recovery.
Worse, such a policy would make an indirect but very clear statement about what the agency thinks of people who find it necessary to file for bankruptcy protection—they’re somehow substandard, good enough to pay the credit counseling fee but not good enough to work for the company. That’s a far cry from the encouragement toward a fresh start and a brighter financial future that we’d like our clients to find in their briefings and educational programs.
It will be interesting to see how this turns out. I the statute and cases a few days ago. Most of the relatively few cases that address Section 525 hold that it only applies to existing employment, and not prospective employment (except for government employment). Otherwise, much of the statute would be redundant. Of course, the policy of the organization's position is a different question.
There have been some follow-up affidavits that said, "I did not mean what I said" and attempting to distinguish betweeen employees who are allowed to conduct credit briefings, the ticket in, and consumer education, the ticket out.