Using Debt Consolidation Audits Of Mandatory Counseling Results

In US Courts, the admissibility of evidence must be proven to the satisfaction of the presiding judge. A debt consolidation audit in bankruptcy refers to examinations of a debtor's financial condition by credit counselors, and because these summaries are prepared by non-lawyer third parties, are admissible into evidence without protection by the attorney/client work product privilege. Inconsistencies disclosed by debtors between counselors and courts usually prevent discharge until resolved.

This paradox - penalizing those who try to avoid bankruptcy - has become quite controversial since credit counseling and budget analysis has become mandatory as a condition of filing personal bankruptcy. Credit card companies, who fund the operation of many of the no-cost and low-cost counseling services, may eventually become adversaries in bankruptcy with only a paper wall between them and the counseling services they fund. The tactic forces debtors to create yet another record that may be used to impeach credibility with innocent mistakes made when confidentiality was assumed.