WASHINGTON -- In what will undoubtedly be the first of many ``I told you so'' reports, the National Association of Consumer Bankruptcy Attorneys has found that, overwhelmingly, people who file for bankruptcy protection aren't deadbeats who went on shopping sprees with the intention of shirking their debts.
    
That's quite contrary to what was being claimed by supporters of a new federal bankruptcy law that went into effect last October. For years, those proponents argued that billions of dollars were being lost because people were simply being allowed to walk away from their debts.
    
``As retailers, we have seen first-hand the dramatic effect bankruptcy has had on both consumers' finances and on our ability to serve the public,'' wrote Steve Pfister, senior vice president for government relations of the National Retail Federation, in a letter to House members as the bankruptcy bill was being debated. ``These filings ultimately cost the tens of millions of households we serve hundreds of dollars each in unseen costs every year. Unfortunately, many of those losses are the result of misuse of the law by irresponsible, higher-income filers.''
    
On the day President Bush signed the bankruptcy bill, he said: ``In recent years, too many people have abused the bankruptcy laws. They've walked away from debts even when they had the ability to repay them.'' The new law now requires people to get credit counseling before they can file for bankruptcy protection. The premise behind this provision is that by forcing people to get counseling, it will show that many bankruptcy filers in fact have enough money left over after taking care of their essential expenses to repay creditors.

  
    
I spent several years reporting on bankruptcy and I saw no evidence (academic or anecdotal) to support claims that scores of people were gaming the system. Now, in the first analysis of the tens of thousands of people who have undergone credit counseling since the law passed, the bankruptcy attorneys association found that nearly all (97 percent) of the debtors really truly couldn't pay their debts.
    
The association examined data provided by six large and small credit counseling firms from a cross section of the country. All of the firms have been authorized by the U.S. Justice Department's Executive Office for U.S. Trustees to provide the required prebankruptcy counseling. In total, the firms that were surveyed counseled 61,355 consumers. Four out of five filers felt forced to seek bankruptcy protection because of a job loss, catastrophic medical expenses or the death of a spouse, according to the report, ``Bankruptcy Reform's Impact: Where Are All the Deadbeats?''
    
Fewer than one out of 20 consumers (3.3 percent) were candidates for paying off what they owe under a debt management plan (DMP), the report indicated. With a DMP, a debtor makes one monthly payment to a credit-counseling agency. The agency then distributes the funds according to a payment schedule they've worked out with the person's creditors. Creditors may agree to lower interest rates or waive certain fees if you are repaying through a DMP, although this is happening less and less as more people sign up for such plans. Typically it takes approximately 36 to 60 months to repay debts through a DMP.
    
The highest estimate of consumers being able to make repayments under a credit counseling DMP was 5 percent, with the low being in the 1 percent to 2 percent range, according to the report. ``The masses of expected deadbeats who were supposed to be identified under the new law and forced into debt management plans have not materialized,'' the association's report concludes.
    
Only about one in five (21 percent) of those seen by a credit-counseling firm were identified as racking up debt due to ``circumstances within their control.'' In many of those cases, people said they didn't fully appreciate how credit card fees and finance charges could put them deeper and deeper into debt. OK, if you must, call the latter folks deadbeats. It's hardly a revelation that if you buy something on credit and you don't pay the bill off the next month, you're going to be charged interest. With the low minimum payments required, it's easy to amass a lot of debt over time. We all know this.
    
But I do sympathize with people who experience a major disruption to their income or become financially ruined by uncovered health care costs (a growing and disturbing trend in America). It is for these people we have bankruptcy protection. There is at least something good to come out of the new law. If you're looking for a reputable credit-counseling agency -- even if you aren't filing for bankruptcy -- I'd suggest you choose one now certified by the Trustee Program. At least then you'll have less of a chance of dealing with a deadbeat agency.
    
To find an agency on the list go to www.usdoj.gov. In the search field, type ``approved credit counseling agencies.''

Listen to Michelle Singletary discuss personal finance every Tuesday on NPR's ``Day to Day.'' To hear her reports online go to www.npr.org. Readers can write to her c/o The Washington Post, 1150 15th St., N.W., Washington, D.C. 20071. Her e-mail address is singletarym@washpost.com. Comments and questions are welcome, but due to the volume of mail, personal responses may not be possible. Please also note comments or questions may be used in a future column, with the writer's name, unless a specific request to do otherwise is indicated.
    
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