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Breaking the bank
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The phones are ringing off the hook at Consumer Credit Counseling Services in Savannah.

“We have five lines coming in,” says CCCS President H.B. “Sonny” Colley. “We can’t seem to answer the

phone quickly enough.”

That’s because, in the wake of the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005, CCCS

has been named as an approved, non-profit budget and credit

counseling agency. Colley’s life hasn’t been the same since.

“We were approved on Sept. 15,” he says. “We had 30 days to get our ducks in a row.”

The new law took effect Oct. 17.

The act makes it more difficult for consumers to erase debt by forcing more people to file under Chapter 13 bankruptcy instead of Chapter 7 bankruptcy.

Portions of the bill are controversial.

For example, the determining formula rewards debtors who have many

assets that are heavily mortgaged and those with large amounts of unsecured debt. Since alimony and child support payments are classified as priority debts, it is easier for people who owe back support to file under Chapter 7.

Democrats have charged that the credit card industry spent millions of dollars lobbying in support of the act and that it benefits those companies far more than it does consumers.

Opponents also argue that the act essentially makes the government “a bill collector for private companies,” which could lead to criminal prosecutions that would actually be best left to civil courts.

In the days before the act passed into law, debtors rushed to file under the old law. Those who couldn’t beat the deadline are now trying to meet requirements imposed under the new law.

“People must come in for consumer credit counseling prior to going into bankruptcy,” Colley says. “A lot of people have rushed to get the counseling.”

Is the new bill a good one? Will it have much effect on debtors in the Savannah area? The answer to that depends on who you ask.

Not everyone is a fan of the law. “The bill is horrible,” says bankruptcy attorney Judson C. Hill. “It is an absurd waste of time. Nobody wins with the new bill.”

Hill says despite the fuss, the law will have little impact in our area. “It will have very little impact anywhere in the Deep South,” he says.

“The bill is designed to make the rest of the country do what we’re doing already -- not file Chapter 7, but

file Chapter 13,” Hill says. “Nationally, many more people are filing Chapter 7. In the Southern District of Georgia, in our district, the highest percentage are already filing Chapter 13.”

The bill is designed to keep people who are making over the median income of their state from filing Chapter 7, Hill says.

“If a debtor’s income is over the median, you can’t file Chapter 7. That will affect very few people in our area -- maybe 10 percent of the people who file. For a family of four, the mean income is $58,000 in Georgia. We just don’t get that many families filing bankruptcy in our area that are earning $58,000 or more,” Hill says.

“The primary fact is that the bill makes the attorney’s work a lot harder,” he says. “There is so much misinformation out there.”

Hill says his office has been swamped with people who say, “I know I can’t file bankruptcy anymore, but....” even though that’s not true.

“There will be an increase in costs, but it will not be so significant,” Hill says.

“It will not impact the client. If you file Chapter 13, the attorney’s fee is included as part of the payment plan.”

The reasons people file for bankruptcy are pretty much what you’d expect. “Loss of a job, illness of the head of the household, uninsured medical expenses and divorce, which is a huge cause,” Hill says.

“Also, there is too much credit available,” he says. “People get a barrage of credit card offers. It is really easy to obtain credit. People don’t have the ability to pay their debts, yet they get more credit cards.”

While the reasons for bankruptcy differ, it would be difficult to design a bill that would fit each situation, Hill says. “To do it any other way, the courts would have to consider each case on a case-by-case basis,” he says.

“If you’re already in a bad situation, it will be difficult to pull out because the economy is the way it is now,” Hill says. “By the time you get here, chances are you are at the end of the road and bankruptcy is the only thing you can do.”

Bankruptcy no longer carries the stigma it once did, Hill says. “Thousands and thousands and thousands of people have filed bankruptcy in Chatham County,” he says.

Republican legislators supported the bill, while Democrats opposed it. Hill says he doubts many Republican legislators would say the bill is a bad one.

“Every Republican senator

or congressman in the U.S. received enormous financial contributions from the credit card industry,” he says.

Sen. Johnny Isakson, a Republican, voted for the act, but says he was not influenced by lobbyists.

“The need for it actually came about a lot earlier than now,” Isakson says.

“Before, it was very easy for people to declare bankruptcy to avoid obligations. It has been abused. It was time for a modern bankruptcy law.”

Isakson says the new law puts the responsibility where it belongs.

“This puts the focus on consumer

responsibility,” he says. “It helps the people who get in trouble and it helps the creditors who lend them money.”

How does the law help consumers? “When expectations are higher, people do better,” Isakson says. “When expectations are lower, they don’t do as well.”

Isakson denies that credit card companies are the main beneficiary of the new law. “In all the time I was here leading up to the passage of the bill, I never once remember being called on by anyone with a credit card company,” he says.

“However, we heard from many small business owners,” Isakson says. “Hair dressers, small contractors -- those are the people who end up being hurt when their customers declare bankruptcy.”

Isakson says the law is a fair one, even if it targets those who declare bankruptcy because of medical bills as strongly as it does those who declare

bankruptcy because of credit card debt.

“You write laws to apply equally to everyone. That’s true of every law we have,” Isakson says. “The bankruptcy law is written to affect all Americans equally. You can’t pass a law that will approve bankruptcy for some and not for others.

“I voted for it because it sets the right standard for handling one’s credit in life,” Isakson says. “It reflects modern times. It’s balanced in fairness to those who get in trouble and those who extend credit to them.”

Savannah-area Republican Congressman Jack Kingston, who could not be reached for comment despite several days of efforts on Connect’s part, also supported the bill, as did Republican Sen. Saxby Chambliss.

In a statement released by Chambliss, the senator says the law will stop “the continued abuse of the bankruptcy laws.”

“Bankruptcy should be there for those who truly need it and not for those who are looking for an easy way out of paying off their debts,” Chambliss says.

“Also, when companies file for bankruptcy, they often leave employees with little or no severance benefits, and greatly reduced, or eliminated, health insurance benefits to which they might have been entitled. This is an injustice, in particular to retirees who depend on their former employer to provide earned benefits.”

Democratic Congressman John Barrow, who represents Savannah in Washington, voted against the bill because he feels it isn’t fair.

“I certainly support bankruptcy reform,” he says. “We need to be harder on deadbeats of all levels.”

The problem with the bill, Barrow says, is that it is not fair to those people who are not deadbeats who must file for bankruptcy. “It left no room for people whose problems are beyond their control,” he says.

“Studies have shown that a much higher percentage of personal bankruptcies are filed by people who can’t pay their medical bills,” Barrow says. “A lot of people are losing everything. There are many, many people who are just one serious illness away from bankruptcy.”

There is another group of people who are forced into bankruptcy by forces beyond their control. “There are people who lose their business because of military call-ups,” Barrow says.

While this group is not as large as the group pf persons affected by medical costs, it is no less in need of help, Barrow says. This group is the direct result of the government calling upon a volunteer, part-time army, he says.

“When they are called up, their businesses fail,” Barrow says. “These people are answering our country’s call. These are people who have a legitimate need for bankruptcy protection because of a military call-up.”

Barrow says there is “plenty of evidence” that the credit card industry did lobby heavily for passage of the bill.

“There is an explosion of consumer debt. It is truly amazing how many people are solicited by credit card companies,” Barrow says. “There is no question there are a number of folks who have more debt than they are able to handle (because of credit cards).”

Barrow says there is a “vast disparity” in how financial problems impact people.

“Women file for bankruptcy much more than men,” he says. “That’s because there are single parents trying to do the job of two people. African Americans and Hispanics are five times more likely to file for bankruptcy than whites. Until we close the gap, we need to take a look at why this is happening.”

While Barrow believes the bankruptcy law is unfair as it stands, he does think something needs to be done about persons with numerous assets who are able to discharge their obligations through bankruptcy. “There are millionaire deadbeats,” he says.

Despite the grief it has caused him, Colley thinks the bill is a good idea. “This is good legislation,” he says. “Under Chapter 7, what is called straight

bankruptcy, a person can walk away from their debts, even though they have assets and income.

“Under the new law, if they have assets or income,they have to file Chapter 13 and pay back a portion of what they owe,” Colley says. “It is going to be more expensive for the consumer to go bankrupt.”

Though he approves of the legislation, Colley is worried about the impact on his agency, the only one in this area to be approved by the U.S. Trustees Executive Office to do the credit counseling. “I’m afraid it’s going to open wide,” he says.

“I haven’t been able to sleep much,” Colley says. “I wake up in the middle of the night and start thinking about what all we’ve got to do.”

As a direct result of the increase in business, Colley is adding staff and office space as quickly as possible. “We’re hiring people in order to meet the demand,” he says.

“We don’t know what the load is going to be,” Colley says. “I’ve hired three people already and two others have offers. There are others I can call on if I see the load and know it is going to be tough. We’ll have to play it by ear.”

The CCCS offices now are located both upstairs and downstairs. “We had to rent a whole other office upstairs and furnish it,” Colley says. “We had to buy all new computers.”

That’s certainly different from when Colley, a former banker, first came to CCCS eight years ago. “When I started here, we had three people and one office,” he says. “We have five offices now and 13 to 14 people.”

Colley says it’s best for debtors to avoid bankruptcy. “When a person goes bankrupt, it affects their credit score in a very negative way,” he says.

“That makes it more difficult for them to get a mortgage, an apartment, cell service, a lot of things,” Colley says. “It can affect their future employment opportunities. It can affect them in many


Financial problems are extremely stressful to the person who is experiencing them.

“All this stuff means a tremendous amount of strain on someone,” Colley says.

There are many reasons why a debtor experiences problems. “Some people have medical situations, something they have no way of avoiding,” Colley says. “Different things happen to different people.”

Some fall into credit card debt. For example, one CCCS client owed $95,000 in credit card debt alone.

“We’re not a society of savers,” Colley says. “We want instant gratification. “People in the past anticipated and used the layaway system. We want it now -- we’ll pay for it later. Because we aren’t good savers, we find ourselves in a crunch.”

At least part of the problem has to do with creditors. “I’ve seen people with five, six and seven credit cards from one company,” Colley says.

Worse, credit card companies are targeting college students. “They load them up on credit cards with the hope that when they get out of school, they will use their card as their preferred credit card,” Colley says, adding that

instead, the students are loaded with debt before they even have a job. “They can’t get a house or a car because they can’t qualify.”

Last year, an estimated 1.6 million to 2 million people filed for bankruptcy nationwide. The top three reasons given for filing were loss of employment, a contested divorce and medical issues.

“In our area, 8,000 went bankrupt,” Colley says. “More people are using Chapter 13, the wage earner plan, where the person pays a portion back to the creditor.”

CCCS has a proven track record and is a member of the National Foundation for Consumer Credit, the most respected credit counseling trade organization in the U.S, Colley says. “Consumer Credit Counseling Services is a non-profit 5013C agency that was founded in 1965,” he says.

“We are accredited,” Colley says. “Every four years we have to go through the accrediting process. Our counselors are certified. Most come from the financial community.”

Colley himself was a banker who introduced one of the first national credit cards in this area. He says consumer credit counseling allows a consumer to pay off credit card debts faster with less money.

Every effort is made to work with the creditor to stop late fees and over-the-limit fees. “A consumer makes a payment to us through a debt-management plan,” Colley says.

The interest rate usually is lowered as well.

“If you have a $2,500 charge card with a rate of 19 percent, it will take 30 to 40 years to pay it out,” Colley says.

With consumer credit counseling, the client is out of debt in a much shorter time. For example, the woman who owed $95,000 in credit card debt was paying a total of $2,637.55 a month in payments, but without late fees and over-the-limit fees, is now paying $1,332.56 per month.

“”Here’s the important part,” Colley says. “She’ll be out of debt in 53 months. Everyone who walks in here will walk out with a plan showing them how to get out of debt. We’re often able to cut the payment in half.

“Everyone who comes in goes through a budgeting session,” Colley says. “We talk about budgeting tips,

the way to build a savings account, how to save on the food bill. We talk about consumer laws.”

How do you know if you need consumer credit counseling? It becomes pretty obvious pretty quickly, Colley says.

“You cannot pay out more than you have coming in,” he says. “We work out a plan on how to get the person out

of debt. The person makes a payment to us, we send it to their creditors. We send them a statement every month to show them who has been paid.

“We do workshops and seminars on financial literacy,” Colley says. “We’re happy to sit down with groups and talk about identity theft, budgeting or credit issues. We also offer housing counseling free of charge. Education is power.”

There’s more than one way to do credit counseling. “We’re the only agency locally approved to do face-to-face counseling and we also do Internet and phone counseling,” Colley says.

“The most important thing is to sit down and make a budget and live by that budget. Make sure you have a savings program you can call on in an emergency -- such as new tires or transmission repair,” Colley says.

“Companies do that. The government does it, too. Big business have budgets -- if they’re successful, they do that. Why can’t consumers do the same thing?”

Colley believes CCCS can help most people who are facing financial hardship.

“I had a man in today,” he says. “He has four more payments to go, and says he couldn’t have made it without us.”

For information about consumer credit counseling, call Consumer Credit Counseling Services at 691-2227 or stop by the CCCS office at 7505 Waters Ave. to pick up an application. Office hours are Monday through Friday from 9 a.m. to 5 p.m. and evenings by appointment.

For more information on the law itself, go to


For a look at the politics and lobbying behind the new law, go to