Come this fall, thousands of people who have never set foot in a counselor's office may be taking their first steps.

		Personal Bankruptcy This is the last of a three-part series on the new bankruptcy law. Previous articles Part One: Bankruptcy is about to get a lot harder -- and, law's detractors say, meaner (4/24/05) Part Two: New law's 'means' test just mean, bankruptcy experts say (4/26/05)

As part of the nation's new bankruptcy law, which takes effect in October, anyone filing personal bankruptcy will first have to seek advice from a credit counselor.

Presumably, the requirement will help stem the tide of bankruptcies by helping some filers avoid the trip to court by working out a plan to pay back creditors on their own, and by teaching others how to avoid repeated money blunders.

Critics, however, say that while the idea may sound sensible, it is loaded with problems.

For one, they say the provision will unfairly saddle financially desperate people with additional costs at a time when they can least afford it.

The law stipulates that credit counselors charge a "reasonable fee" for their services and provide counseling without regard for a client's ability to pay.

Nevertheless, most people probably will end up paying, said Jeff Morris, resident scholar at the nonpartisan American Bankruptcy Institute.

The way the law is written, "It sounds like you can get counseling for free," he said. "That's what the law says, but it ain't going to happen."

What's more likely, he said, is that anyone with any kind of income will be told to pay up.

"Obviously, [credit counselors] can't give their services away for free," he said.

Moreover, critics contend that upfront counseling likely will be a waste of time.

The law stipulates that debtors undergo counseling and a budget analysis in person, over the phone or through the Internet conducted by a court-approved, nonprofit agency within six months prior to filing for bankruptcy. If a debt repayment plan is developed, a copy must be filed with the court.

"It's a good idea, but bad timing," said Travis Plunkett, legislative director for the Consumer Federation of America in Washington, D.C. "Credit counseling can work when it happens early enough to do some good. It's simply going to be too late for many people."

Opponents also are concerned that the provision will end up pushing vulnerable consumers into the hands of unethical operators.

The credit counseling industry is being scrutinized by state and federal investigators for deceptive practices, excessive fees, shoddy counseling and outright fraud.

"Given the turmoil in the counseling industry, it's disturbing that this bill could force people into the hands of unscrupulous counselors," the Consumer Federation's Plunkett said.

To give consumers direction, the law requires U.S. bankruptcy trustees -- people appointed by the courts to oversee bankruptcy cases -- to come up with an approved list of counselors.

Ken Steinberg, a bankruptcy attorney at Steidl & Steinberg, Downtown, applauds that rule.

"There are so many garbage agencies out there ... it's a good way to sort out the ones preying on people," he said.

But others argue that job may be an impossible task.

"I don't know how the trustees are going to do all this," the bankruptcy institute's Morris said.

Plunkett also is skeptical.

"I've been following this industry for five years, and I couldn't name every legitimate agency. That's a tough call to make," he said.

Trustees "will have to make that call 100 percent of the time. There is no agency or official that could do that."

Another provision under the new law directs bankruptcy filers to complete a course in financial management before a judge could approve their case and erase any debts.

The requirement raises some of the same concerns as mandatory credit counseling, and leaves other key questions unanswered, critics say.

"What happens if I take a test and flunk the course?" Morris asked.

"I don't know. The law doesn't say."