Federal law requires individuals to receive credit counseling to declare bankruptcy, but the government does not run or train credit counselors. The closest things to federal consumer credit counseling are private counselors approved to offer advice to the newly bankrupt. If you need assistance in getting your finances under control, you should perform due diligence on any credit counselor or agency, because the agency might try to sell you unnecessary services.
Identification
There are no "federal" consumer credit counseling agencies. However, the U.S. Trustee Program approves private and nonprofit credit counseling agencies for the credit education requirement for filing bankruptcy. The U.S. also requires consumers coming out of bankruptcy to go to a federally approved debt educator. This is similar to credit counseling, but the educator focuses on setting a budget, and counselors approved for pre-bankruptcy counseling may not be approved for debtor education.
Features
A pre-bankruptcy credit counseling session involves the counselor reviewing your financial situation, setting a budget and explaining options that can prevent a bankruptcy. The counselor cannot tell you to declare bankruptcy, because that would constitute legal advice, according to the Federal Trade Commission (FTC). At the end of any pre-bankruptcy or post-bankruptcy education course, you receive a certificate indicating you completed the course.
Where to Find Federally Approved Counselors
The federal government lists approved credit counselors and debt educators on the U.S. Trustee Program web page of the Department of Justice (DOJ) website. The FTC notes that many nonprofit organizations have credit counselors on-site, such as colleges and universities, military bases, credit unions, housing authorities, and branches of the U.S. Cooperative Extension Service. Your bank or a local consumer watchdog group also can direct you to a reputable, federally approve counselor.
Tip
Do not assume that any credit counselor listed by the DOJ is perfect for your needs. You should interview several potential credit counselors and ask what services they offer and what fees they charge. Also, request the certification of the counselor, how customer information is kept private, and whether employees receive a commission for signing up consumers for new services or whether the counseling agency is supported by donations.
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