NorthJersey.com has posted an article that discusses how some heads of non profit agencies specializing in bankruptcy counseling are using the lagging economy to line their personal pockets. There are 44 non profits nationwide who are federally approved to provide bankruptcy counseling. 12 of the 44 pay their executives $300,000 or more annually.
“The money that’s coming in is coming off the back of consumers,” said John Rao, a lawyer with the National Consumer Law Center in Boston. “It certainly makes you question the concept of them being non-profits.”
The non profits who specialize in consumer credit counseling argue that they pay their executives what other non profits of the same size pay their executives and claim the bankruptcy fees they collect from clients are just a small part of their funds. In 2005 Congress passed a law that required consumers to have a 90 minute counseling session with a financial counseling agency before being able to file for bankruptcy. They can charge up to $50 for this required session, but have to waive the fee if the person can’t afford to pay. Typically, most of these non profits’ income comes from 2 places: fees paid by consumers and grants and fees from banks and other financial institutions.
Because many of the non-profits bring in a significant portion of their revenue from debt-management fees, some consumer lawyers say the agencies have an incentive to steer debtors away from bankruptcy filings and into the debt-management plans. Industry officials, however, insist they steadfastly avoid doing so.
What’s indisputable is that some counseling agency officials are among the nation’s highest paid non-profit executives. Topping the list in 2009 was Ivan L. Hand, president of Money Management International in Houston, at $918,641, including bonuses, deferred compensation and other fringe benefits. MMI is by far the largest non-profit credit counseling agency, with revenues of $105.9 million.
Also high on the list are Jane E. McNamara, president and CEO of GreenPath in Farmington Hills, Mich., who received $565,352, and Etta W. Money, president and CEO of InCharge Debt Solutions and four related non-profits in Orlando, Fla., whose total compensation came to $476,171.
Some bankruptcy lawyers and consumer advocates argue that such massive paychecks are ridiculous and make it appear that some people are, in fact, making a profit off a non profit organization. Executives and officials at larger non profits argue that their pay is comparable to what executives at organizations of a similar size earn…which is allowed by federal tax laws. Gail Cunningham, vice president for public relations at the National Foundation for Credit Counseling in Washington, says that the salaries are reasonable given the size of the non profits.
The Consumer Law Center- which advocates to Congress- has been arguing that the required 90 minutes sessions are a waste of time and money. They claim that the session remains identical to how it was before the 2005 law passed, and that consumers only do it because they are required to and already know that they will end up filing bankruptcy. The required session is just a cost added to them.
However, Ms. Cunningham counter-argues that no one needs credit and debt counseling more than someone considering bankruptcy. Sometimes the counseling session results in consumers who were going to file for bankruptcy being steered to sign up for a debt-management plan. The non profit agency then works out a payment deal with creditors and charge the consumer a monthly fee.
Sandy Shore, a supervisor of a non profit debt counseling agency, says that her agency doesn’t allow bankruptcy counselors to steer their consumers away from filing bankruptcy.
Before you decide to file for bankruptcy, it’s imperative that you consult with an attorney. If you have further questions or concerns about bankruptcy, feel free to contact us through our website or by calling 205-879-2447. You may also obtain a copy of our free book on stopping wrongful foreclosures and the problems of hidden fees by emailing us.
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